THOUSANDS OF customers of the main banks are expected to get refunds in the latest overcharging controversy to hit the sector.
Bank of Ireland yesterday revealed it was issuing €3 million in refunds to 43,000 customers who made ATM withdrawals between 2005 and 2009 but never took their money.
However, other banks are likely to find themselves paying similar compensation because they introduced the same anti-fraud measures blamed for the problems at Bank of Ireland.
One bank told The Irish Timesit "wouldn't be surprised" if it had to issue refunds once an internal review was completed. The Financial Regulator said it has written to all financial institutions about the issue.
Bank of Ireland said it was issuing refunds to 14,000 of its customers and 29,000 customers of other banks who made the phantom withdrawals over a four-year period. The problems relates to customers who sought to withdraw money from an ATM but did not take the money out of the machine. Research by the bank points to a number of reasons for this, including incoming mobile phone calls and other distractions, and a failure to take back the debit card, which must be withdrawn in order for the money to appear. Other customers failed to take their cash within the required 30 seconds.
Only about half the affected customers realised an error had occurred when their accounts were debited with the withdrawal. These received refunds on a case-by-case basis when they complained, but the bank failed to recognise a wider systems problem until 2009.
Yesterday, it said the issue arose following the installation of anti-fraud measures “which resulted in the normal system response of automatically prompting a refund to issue not to occur for these particular transactions”. Enhanced procedures were put in place for handling incomplete transactions since October 2009. Some €1.3 million is being refunded to Bank of Ireland customers this week and arrangements are being made with other banks to refund a further €1.7 million to customers of other banks who carried out incomplete transactions on Bank of Ireland ATMs.
The bank said it didn’t know why so many customers had walked away from money in ATMs.
The unexpected windfall – equivalent to €93 per customer – is small compared to the €16.6 billion flowing out of Bank of Ireland’s 1,300 ATMs each year.
The anti-fraud measures were introduced to combat transaction reversal fraud. In this scam, a compromised card is used to withdraw money but the top and bottom notes in the pile offered by the ATM are not taken.
Before the new measures, the ATM wrongly understood no money had been withdrawn and allowed further withdrawals.
In one case, €50,000 was taken using this method.