ALLIED IRISH Banks refunded less than €1 million to customers who were overcharged on management fees in 2001 – a small fraction of the €50 million to €75 million the bank’s former internal auditor has estimated was overcharged by the bank.

The Irish Times understands AIB reimbursed a six-figure sum to customers to settle the overcharging on managers’ fees.

Eugene McErlean, AIB’s group internal auditor between 1997 and 2002, told the Oireachtas Joint Committee on Economic Regulatory Affairs on Tuesday that some managers overcharged business customers to meet targets set by the bank for their branches.

He said this included a manager charging a customer an hourly fee for playing golf for three hours. Mr McErlean said he reported the overcharging to senior management at AIB in 2001, but several months after issuing his audit report, no action had been taken.

“This was important, not only from the point of view of the unwarranted delay in making restitution to those who had been overcharged, but also because I felt that a full management review was necessary in order to identify the complete extent of the overcharging culture at AIB,” he said.

The overcharging was reported to the Central Bank by the bank and Mr McErlean raised the issue again in May 2002 after he had left the bank following the John Rusnak rogue trading affair.

He claimed that the Central Bank and Financial Regulator, which was set up in May 2003, had failed to act to protect consumers.

An AIB spokeswoman repeated that all issues raised by Mr McErlean were fully reported to the relevant regulatory authorities, fully investigated and fully addressed.

The bank later set aside €65 million in 2004 for customers overcharged on foreign exchange and payment protection insurance that emerged within the bank in 2002 but only became public in 2004.

Responding to Mr McErlean’s claims, acting chief executive of the regulator Mary O’Dea said the overcharging inquiry on management time fees was closed by the Office of the Director of Consumer Affairs, the predecessor to the regulator, in 2003.

“It is absolutely true that the powers the Central Bank had on consumer protection did not exist and that the regulator was established in 2003 with a view to protecting consumers,” she said.

Ms O’Dea said the regulator took overcharging “very seriously” and that the tougher approach adopted by the regulator towards AIB “was influenced by the suggestion of a cover-up at the bank”.

“It is my experience that every time a charge is notified to us as being an overcharge, it can appear across the population to be a large amount and then it turns out being quite small,” she said. She added that the regulator “could not be accused of not acting enough on overcharging” and that the trawl to find every customer affected by overcharging was “absolutely and hugely thorough”.

She said that where customers could not be identified due to the passage of time, money was paid to charity. She said the refunds in the administrative [management] time charge issue was confused with other overcharging by AIB, “of which there are many”.

Ms O’Dea will write to the committee this week responding to Mr McErlean’s evidence.