Banks say sorry over credit rate blunders
APRs advertised as lower than they actually were
SEVERAL Irish banks have been forced to say sorry to customers after they got their sums wrong and incorrectly calculated the annual percentage rates on credit cards and overdrafts.
When taking out credit agreements, customers are often advised that the APR – which banks work out using non-standard complicated mathematical formulae – is the best method of comparing the charges offered by different lenders.
But the banks all applied their formulae incorrectly and the blunder resulted in APRs being advertised at a lower rate than they should have been.
Following a Central Bank probe, two of the banks involved – Allied Irish Banks (AIB) and Permanent TSB – have agreed to make a donation to charity in recognition of the error. Bank of Ireland last night declined to comment.
A spokesman for KBC said: ‘Advertised APR rates for the KBC tax and pension product were not calculated in line with the European Communities (Consumer Credit Agreements) Regulations. No KBC customers were overcharged as a result of the error and KBC is writing to those customers affected.’
It is understood that the APRs were wrongly calculated between 2010 and 2013. However, some consumers have only just received letters informing them of their bank’s mistake.
In a letter to PTSB customers this week, commercial director Mark Coan admitted that in its own case, the bank had wrongly set its APR at 18.4% when it should have been 20.7%. But Mr Coan was keen to stress the bank believed no customer had been overcharged as a result.
He wrote: ‘The APR is for illustrative purposes only and this did not affect the application of the correct interest rate to your account.’ Mr Coan also told customers that the bank would make a donation to charity ‘in recognition of our error’.
AIB, meanwhile, has admitted ‘shortcomings’ in the way it advertised its products.
Last night, the Consumers’ Association of Ireland said consumers were entitled to feel they had been misled into taking out credit cards and overdrafts by the lower rates.
CAI spokesman Dermott Jewell said: ‘Customers only took out products because they thought they were affordable.’
When contacted by the Irish Daily Mail, a spokesman for the PTSB said: ‘In common with a number of other banks, Permanent TSB identified an error in how the APR rate on certain loans was calculated. The APR rate is not the rate which was charged on accounts but it was used in some materials sent to customers taking out loans and credit cards.
‘Nevertheless, we reported the issue to the Central Bank and we are now writing to relevant customers to advise them of the error and to advise them that we will make a contribution of €25 for each affected account to charity in recognition of the issue.’ But Mr Jewell said the banks should be doing more than making contributions to charity to improve relations with their customers.
He said: ‘Some credit card customers may want to switch their balances as a result but the effect of this mistake on someone with an overdraft, who can’t easily switch accounts, would have been quite severe.’
Customers ‘were not overcharged’