Ulster Bank's First Active unit will in the coming week alert thousands of its mortgage protection insurance customers that they are due a refund after an overcharging error that was detected at the start of 2004.

First Active, which made public the overcharging error in February 2006, said yesterday that the delay in making repayments until now was due to work on an internal review to assess the scope of the problem and to identify each of the customers involved.

A spokeswoman acknowledged that the mistake was discovered when Ulster Bank acquired First Active at the beginning of 2004, but she denied that the organisation was tardy in its response to customers.

However, the delay of more than three years in making the refunds was criticised in strong terms by Labour's finance spokeswoman Joan Burton.

"There appears to be a completely unwarranted delay in refunding customers who were overcharged by a major financial institution.

"I would expect the financial regulator to be exerting greater pressure on banks to ensure that consumers are fairly treated," she said.

First Active declined to quantify the amount of money that it will pay out as a result of the overcharging, which went back as far as 1997. It also declined to quantify the number of customers concerned, but the spokeswoman said that "thousands" were affected.

While the average repayment will be in the region of €40, the spokeswoman acknowledged that some customers will received hundreds of euro.

The overcharging occurred when customers who redeemed their First Active mortgages were charged an extra monthly premium for the month in which they redeemed the loan.

Refunds of hundreds of euro concern annual premium payments as distinct from monthly payments.

First Active, which blamed a computer error, said that the affected customers will be refunded the amount they were overcharged, plus interest.

While the institution suggested in February 2006 that customers would be repaid "in the next few months", the financial regulator did not indicate that it was concerned about the delay in making refunds.

Asked whether First Active's response was adequate, a spokeswoman for the regulator said: "The important outcome is that the affected customers are repaid."

In a statement, First Active said: "Following an internal review, First Active plc can confirm that in the coming week we will be contacting a number of customers regarding a system error that occurred when loans were repaid and the insurance policy was cancelled following the early repayment of the loan.

"A number of customers received an incorrect partial refund of the insurance premium. The refund due relates on average to one month's premium per customer.

"All customers affected will receive a refund with compound interest. All of the necessary steps have been taken to prevent a recurrence of this error."

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