Wednesday, March 25, 2009

Overcharging at AIB - 'my personal experience'

Mr Eugene McErlean, former Group Internal Auditor of AIB Plc, from 1997 to 2002 presented to the Oireachtas Joint Committee on Economic Regulatory Affairs yesterday, March 24th. He told the Committee that the Financial Regulator knew about the overcharging of customers in AIB in 2001 and conducted an investigation in this in 2002 but failed to protect customers. He described how €65 million was liable to be paid as restitution to AIB customers who had been overcharged. He also related how a branch manager charged a customer for playing golf for 3 hours’ management time and how the overcharging regime never involved large individual sums so customers were never really in a position to argue. That is until they overcharged me!

When it comes to bank overcharging my antennae is particularly sharp when the subject is AIB Bank. My own experience predates the inauguration of the Irish Financial Regulator. I started a £14,000 20-year mortgage with AIB in 1978 that was fully discharged on schedule and with no missed payments. I recall one February day in 1999 looking at my AIB current account bank statement on the internet and being horrified to discover a debit for a £50 ‘Mortgage Closure Fee’. I instantly called the account officer at the Bankcentre branch in Ballsbridge where my account was maintained. I told this person outright that I was not paying this charge. She advised me that “everybody pays this charge” to which I again responded that “I am not”.

The branch manager then came on the line. I had never met him and I had the impression that he was busily scanning my account history on a computer before he began to converse with me. When he did so I said “you know why I’m on the line. I am not paying this charge”. He responded that I had “operated a very disciplined account” which was the case and still is, to which I replied “yes, so disciplined that the bank never has to spend as much as 32 pence on a stamp to recover a mortgage instalment over the previous 20 years, a period when interest rates were so high that the Government had to subsidise them. You have had this account for 25 years and you can have it for a further 25 seconds while you’re making up your mind about this charge”. He immediately took the only course open to him and dropped the charge.

This incident coincided with the attendance of former Taoiseach, Charles Haughey, at The Moriarty Tribunal and an examination of his relationship with AIB. He owed AIB over £1 million in 1979 when he was elected to the office of Taoiseach.. Haughey had received £750,000 from an unidentified source to help defray this debt and he apparently offered to arrange a £10 million deposit from a source in the Middle East in exchange for offsetting the balance of the debt. But Haughey never repaid a sum of £110,000, on which there was to have been no interest charged, as an element of an overall settlement. Mr Justice Moriarty found that AIB had settled a £500,000 overdraft owing by Haughey shortly after he became Taoiseach on favourable terms and that AIB had shown extraordinary deference to Charles Haughey in their dealings with him. Haughey, it appeared warranted special treatment because he was, as AIB would see it, a KBI (key business influencer). It also coincided with the announcement by AIB of record profits of £800 million+ for 1998.

My fingers were dancing with rage and I decided to write to the Chief Executive of AIB, Tom Mulcahy. The gist of what I said to him was that I was not a KBI but I would consider myself an LLP (loyal little peasant). I stated that this charge was immoral and that I would welcome a debate with him on one of the talk shows on RTE Radio 1; that if he had any balls he would have sent me a case of wine to thank me for my trouble-free business over 25 years rather than imposing this awful immoral charge. Three days later a 6-bottle case of wine arrived at my home from Mitchells Wine Shop, then located under the old railway arches in Harcourt Street!

The upshot is that:

  • The charge was instantly removed from my account
  • The charge, as then defined, was eliminated from AIB’s charge tariff
  • The charge was one of those rogue charges similar to those described by Mr McErlean in his evidence on 24 March 2009, ten years later.

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