In its third admission of overcharging customers in a month, AIB has said it repaid €3.4 million in compensation and refunds of fees to trust clients after it overcharged some who set up trusts prior to 1971.
However, the bank has yet to identify all the clients who may be entitled to compensation and the total payout may amount to as much as €5 million.
This is the third time the bank has admitted overcharging clients in the past month. The bank has deposited €25 million with the Central Bank to compensate clients who were charged the wrong rate of commission on a number of foreign exchange transactions. It has also admitted charging some mortgage customers for mortgage protection insurance without their knowledge.
In a statement this evening, AIB said it had initiated a review of its trust business in January 2002 and identified "a potential issue" relating to the charging structure being applied to some trusts that pre-dated the formation of AIB 33 years ago.
"Following this initial investigation, AIB immediately brought the issue to the attention of the regulators (then the Central Bank and the Director of Consumer Affairs and now IFSRA)."
In 1971, after AIB was formed, a new booklet setting out AIB's fees and charges for its trust services, as agreed with the Central Bank, was published. In general, the bank said, trusts established prior to that date were entitled to have their fees remain at the rate set by the relevant constituent bank (i.e. the Royal, Provincial or Munster and Leinster) when the trust was established.
"However, the review showed that the post 1971 AIB fees had been applied to some pre-1971 trusts and, consequently, the excess fees should be refunded and the trust or its beneficiaries compensated accordingly.
"The review found that there were 43 'active' trusts (i.e. existing cases in which AIB was acting as trustee) which were established prior to 1971, to which refunds were due. Refunds amounting to a total of €1.7m and compensation also amounting to a total of €1.7m (overall total €3.4m) was agreed. This process has now been concluded."
AIB said it had engaged external legal and taxation advisors to ensure that the refunds and compensation made to the trusts or beneficiaries were appropriate.
There were also some closed trusts which may also be entitled to refunds and work is currently underway to identify the number of such trusts and their beneficiaries with a view to compensating them, the bank said.
"IFSRA is also being kept fully informed of and involved in this process. The likely total refund and compensation sum in relation to the closed funds will, it is estimated, be less than €2m."