# Summary of IFSRA findings on AIB overcharging



## Brendan Burgess (1 Dec 2004)

_A PDF version of the full report is [broken link removed]_
Interim Progress Report and Findings
The Financial Services Regulator published a progress report on 23 July 2004. The priority at that time was to identify the amounts involved, the number of customers affected and an appropriate me thod for repaying those customers.

The main findings of the progress report were:
1. AIB provided an incorrect notification of charges to the Regulator, both in relation to FX and non-FX notifications, contrary to what was required under Section 149 of the Consumer Credit Act, 1995.

2. The total amount involved in relation to foreign exchange charges over the notified amount was confirmed at €25.6 million.

3. The total number of foreign exchange transactions affected was estimated at three million.

4. The charges AIB levied in relation to FX were in excess of the notified charges,but appear to have been in line with those charged by its competitors.

5. Section 149 notification breaches identified during the investigation, other than those relating to foreign exchange, amounted to €0.5 million, affecting about 14,500 transactions.

6. AIB agreed to repay the above amounts, even though there was no lega l obligation on them to do so either in contract law or in the legislation then in place.

7. Following a full investigation into unregulated (non-Section 149) charges, instances of charging over the amount agreed with the customer were found. These totalled €8.1m including interest, and involved 24 categories of charges. AIB has a legal obligation to refund in this case and has committed to refunding this amount to the customers involved.

The most significant facts identified in the progress report of 23 July 2004 were that the total amount of excess charges identified came to €34.2 million and that AIB failed to comply with Section 149 of the Consumer Credit Act, 1995 and failed to bring these breaches to the attention of the Regulator.
Subsequent Findings Since the publication of the progress report, the Financial Services Regulator has continued its investigations, which focused on when the discrepancies came to light, how they were handled within AIB, how they persisted over an extended period of time and why the Regulator was not informed. 


The following are the findings of this final phase of the investigation:
1. From 1996 onwards, when Section 149 operated, certain staff and management within certain areas of AIB appear to have been aware of the fact that AIB were charging over the amount notified to the Regulator.

2. There was inadequate documentary evidence of decisions made in relation to changes in charges, including the original notification. There was also inadequate record keeping within AIB around the issue of Section 149 charges and other charges.

3. At least seven opportunities arose for certain staff and management within certain areas of AIB to identify and/or disclose the discrepancies to the relevant Regulators. These opportunities arose in March 1998, September 2002, December 2002, February 2003, May 2003, August 2003 and November 2003. These ranged from requests from the Regulators to confirm that notified charges were correctly applied, to a situation where a particular internal
memorandum in 2002, analysed the issue and drew attention to the need to inform the Regulator. This was not done.

4. During the period from January to April 2004, a number of deliberate measures were taken which resulted in the relevant charge being reduced in April 2004 to the level notified to the Regulator in 1996. The Regulator was not informed. These measures are open to the interpretation that it was intended to subsequently notify the Regulator of a proposed increase without ever drawing attention to the previous breach.

5. The procedures for reporting up the line within AIB proved inadequate and resulted in the matter not being resolved.

6. Controls within AIB were weak in relation to monitoring customer charges. In this regard, the Compliance Function in AIB was insufficiently resourced to effectively monitor the application of charges.


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## maranello (8 Dec 2004)

*IFSRA Consultation on Sanctions Procedures*

Am I alone in finding some of the language used in the section dealing with overcharging somewhat disproportionate to the alleged offences? They were only charging rates at around the market rate, they just hadn't sought formal approval to charge them.

Why do I get the impression they are being punished retrospectively for Allfirst which admittedly was an almighty cock-up?

(For the record I have no financial or other interest in AIB.)


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## darag (8 Dec 2004)

*Re: IFSRA Consultation on Sanctions Procedures*

hi maranello, i read some of it but i had to stop as i nearly had an attack of narcolepsy.  however i agree with your point.  i'm no lover of the banks but the word "overcharging" doesn't not really describe what happened.  despite charlie bird's overexcited and hysterical bleatings, it was more a case of failure of reporting a particular margin to ifsra.  if they had reported the margin accurately, then viola - suddenly nobody has been overcharged.  it wasn't like aib were advertising one rate but charging another - the margin was a largely meaningless internal aib figure.

also, if it wasn't for what was probably an inside tip, i can't imagine the ifsra or charlie bird ever discovering the "overcharging" themselves and the consumers would have continued availing of aib's advertised rates.

it's all very well for the ifsra to say that they expect the institutions to do all the policing (page 3 - by adopting "a largely principles-based approach") but that makes the whole effort pointless.  i.e. the ifsra just sits there being a repository for figures the institutions supply to them?  what does that do for the consumer exactly or the regulation of financial products and institutions?  it seems like the ifsra are happy to make public statements about this and that but when it comes to the hard graft of actually REGULATING they deny that they have any active role?  when they try to do something for the consumer, like the last survey on loans, they make a complete balls of it.

in fact, i think the whole thing is a farce; charlie bird and the ifsra get to present themselves as the protectors of the poor consumers when neither did anything investigative except to use the situation to gain publicity and garner kudos.


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## rainyday (9 Dec 2004)

While there has been some overreaction to the original report, I do find this fresh finding from the report disturbing.



> During the period from January to April 2004, a number of deliberate measures were taken which resulted in the relevant charge being reduced in April 2004 to the level notified to the Regulator in 1996. The Regulator was not informed. These measures are open to the interpretation that it was intended to subsequently notify the Regulator of a proposed increase without ever drawing attention to the previous breach.


This means that *this year* in the current regulatory environment, with Gleeson & Buckley at the wheel, a cover-up for the original problem was attempted. This is worrying.


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