AIB has agreed to compensate more than 1,100 customers who were charged the wrong rate on tracker mortgages.
The bank has started contacting customers of its subsidiaries, EBS and Haven, telling them that they should have been on a lower rate.
In a statement, AIB blamed the overcharging on an “administrative error” in relation to their tracker mortgage accounts.
A tracker mortgage account tracks the European Central Bank base rate and the mortgage rate is usually around 1 per cent higher than that.
The bank said the error occurred at the point of drawdown when the customer was placed on a tracker mortgage at the wrong margin.
A number of customers were placed on a higher margin and others on a lower margin.
“Those on the lower margin will continue on this rate while those who were on the higher margin will be put on the correct margin, and receive redress and compensation while the balance on their account will also be corrected,” the bank said in a statement.
“ The bank will be writing to customers to explain the rectification and to apologise.”
It is the latest tracker mortgage controversy to affect Irish lending institutions, and comes amid claims that banks are profiteering from the Covid-19 crisis by charging mortgage interest on customers who avail of a Government-backed moratorium on mortgage payments during the crisis.
On Saturday, Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar said his assumption when dealing with the banks was that he “doesn’t fully trust what they say until it has been demonstrated otherwise.”
Mr Varadkar, who is to meet the chief executives of the banks next week, along with the Minister for Finance, Paschal Donohoe, said that when you meet the banks “they talk you down with regulatory gobbledy-gook”.
Asked if he believed the banks would not seek to make additional profits from interest breaks granted to customers because of the coronavirus lockdown, Mr Varadkar said the banks "have form, that's the truth of this. We've seen the tracker mortgage scandal".
The Central Bank published a final report last July on an industry-wide examination into tracker-mortgage cases that had been going on since last 2015.
It concluded then that 40,100 borrowers had either been wrongly refused their right to a cheap loan linked to the European Central Bank’s (ECB) main rate, or put on the wrong rate entirely.
Since then the regulator has found an additional 400 tracker cases.
In April nearly 6,000 AIB customers received thousands of euros in refunds and compensation following a review by the Ombudsman of tracker mortgage rates, the bank has said.
Then AIB acknowledged that it “fell short on our obligations to some customers” and laid out a number of measures to support customers affected by the tracker mortgage scandals.
