The Government has approved new measures to empower the regulator of the financial institutions to levy fines on banks of up to €5 million if they overcharge their customers, it has emerged, writes Arthur Beesley, Political Reporter
In a direct response to the foreign exchange affair at AIB, the Cabinet yesterday agreed to introduce immediate changes which will make it a crime to charge more for a service than the rates advised to the Irish Financial Services Regulatory Authority (IFSRA).
The measures will also empower the IFSRA to disqualify directors or managers from being involved in the management of a financial institution and fine them up to €500,000.
While AIB's overcharging of foreign exchange customers by some €20 million is now the subject of two investigations, the new measures will not apply retrospectively.
The changes will be introduced today by the Minister for Finance, Mr McCreevy, in the form of an amendment to the Central Bank and Financial Services Authority of Ireland Bill, which is the subject of a final stage debate in the Dáil today.
The Bill is designed to broaden the powers of the IFSRA, which was branded a "watchdog with no teeth" last week by Labour.
The amendments will be introduced a day before the appearance of IFSRA's chief executive and consumer director before the Oireachtas Joint Committee on Finance and the Public Service.
Senior figures from the AIB management team and the governor of the Central Bank, Mr John Hurley, are to be called before the committee in the coming weeks.
The change to be introduced today will make it an offence under the Consumer Credit Act for a financial institution to levy a charge on its customers which is in excess of the rate notified to the IFSRA.
Such an offence will be punishable by the courts, under the Consumer Credit Act or, as an alternative to court proceedings, by the IFSRA itself.
The IFSRA will be empowered to establish a board to investigate possible breaches of the regulations and law governing the financial institutions.
Where breaches are uncovered, the sanctions that may be imposed on a financial service provider include fines of up to €5 million. They also include caution or reprimand, an order to refund a charge and an order to pay the costs of an investigation. The sanctions that can be levied on directors or managers include a fine of up to €500,000.