The Director of Consumer Affairs, Ms Carmel Foley, has said her office did not investigate AIB for overcharging foreign exchange customers by an estimated €20 million because no one ever complained about the levy in question.

The Irish Financial Services Regulatory Authority (IFSRA) estimated yesterday that AIB overcharged its customers by €20 million on non-cash foreign exchange transactions valued at more than £500 (€635) between 1994 and last month.

It also said that the bank owes €5 million in interest to those it overcharged. Following a "frank exchange of views" with IFSRA, AIB has lodged €25 million with the Central Bank of Ireland to cover this liability, which is €11 million more than its original €14 million estimate of its exposure.

IFSRA's investigators have increased their estimate of the bank's liability because they believe that it had been overcharging customers as far back as 1994, two years before AIB said the original error occurred.

Reacting to the new development yesterday, Small Firms' Association director, Mr Pat Delaney, argued that the problem would not have arisen if the regulators at the time had been doing their job.

The Director of Consumer Affairs was responsible for policing bank charges between 1996 and this time last year, when IFSRA took over.

Last night, the director, Ms Carmel Foley, told The Irish Times that her office had not investigated the bank's application of the specific non-cash foreign exchange charge because consumers had not made any complaints to her office about it.

"We had a lot of activity in the whole area of bank charges, and we went to the High Court in one case," she said. "But we had no reason to investigate that particular charge because no one raised it with us. It might not have been seen as a mainstream consumer charge."

The bank notified the office in 1996 that it was charging a half per cent fee on all non-cash foreign exchange transactions. It was actually charging them 1 per cent.

Last week, AIB said it had intended charging 1 per cent, but had mistakenly said half per cent on its notification. Ms Foley's office may not have received any complaints because consumers would not have realised that they should be paying a lower charge.

While IFSRA - established a year ago - now has the power to investigate bank charges, it is still waiting on the Oireachtas to pass legislation that will allow it to prosecute them for breaches of the law.

In a statement yesterday, AIB chairman Mr Dermot Gleeson said that, following talks with IFSRA, the bank would set up its own investigation, "directed by a person of undoubted independence".

"This individual, who will be named within a week, will have access to external independent audit expertise in carrying out the investigation," Mr Gleeson said. The inquiry is expected to be completed by mid-June. AIB will bear the full cost of the investigation.

Mr Gleeson also said nothing in information currently available suggested that the responsibility lay with junior staff. He added that the independent investigation would establish responsibility, and that the AIB board would then address it.

Mr O'Reilly said bluntly yesterday that the AIB board had "serious questions to ask". He also stated that the cost of its own investigation was likely to be higher than any fines IFSRA could have imposed.

Mr Delaney last night welcomed the fact that IFSRA was tackling the latest scandal to engulf the country's biggest bank.