BANK OF IRELAND has begun an investigation into how a group of customers was charged up to £500,000 more than it should have been under its invoice discounting scheme.
The error, which occurred between October 1991 and November 1992, may have affected up to 200 customers. The error was recently detected by a former Bank of Ireland employee who now advises businesses on costs saving.
Invoice discounting is an arrangement between a bank and its clients under which the bank will advance some or all of the company's sales before the company is actually paid. The bank charges the firm a fee for collecting the monies from its customers.
The scheme provides companies with access to funds, normally tied up through debts they are owed.
The error, which occurred in Bank of Ireland's commercial finance division, is only likely to be a fraction of a percentage point, according to BOI's director of client services, Mr Paddy Delaney.
However, the Irish Small and Medium Enterprises Association (ISME) says the effect on many customers will be several thousand pounds. In one case, one of its members was overcharged by around £4,000.
"It is, in itself, an indication of how fractions of 1 per cent in interest rates can cost firms dearly and yield the banks a tidy margin," said ISME chairman Mr Eoghan Hynes, who has also raised the matter with B o I. His organisation believes the error cost firms around £500,000.
However, he praised the bank for acting promptly to rectify the matter.
Mr Delaney told The Irish Times that it was not possible to say how much the error had cost firms. He declined to say how many customers were using invoice discounting at the time, but he was adamant that the error was only a fraction of a percentage point.
Mr Delaney said it was not known yet how the fault had occurred, but it was a "system fault of some sort" which had only Just come to light, when an "external consultant" approached the bank.
The external consultant was Mr Ronan Cobum, who runs a company called The Bottom Line, in Dun Laoghaire, Co Dublin, specialising in advising businesses on general cost reduction. He says he used to work in Bank of Ireland, although not in its commercial finance division, and took voluntary redundancy 18 months ago.
He was doing software checking for a number of clients when he found a recurring inaccuracy in the bank's figures. It is understood he contacted a number of the bank's clients, offering to recover the money for them, if they would split the monies due with him.
