Small firms lobby group ISME has called on the Government to order a thorough investigation into bank overcharging by an independent group to be funded by the banking sector.

It also says heavy penalties should be imposed on those found guilty of overcharging up to 10 times the amount overcharged.

ISME chief executive, Mr Frank Mulcahy, claimed yesterday that the practice of overcharging has been going on for a long time and is not just confined to National Irish Bank (NIB). He also dismissed as "inadequate" the Director of Consumer Affairs' spot check which found no evidence of current overcharging.

ISME has conducted its own survey of members which reveals that more than half (52 per cent) believe they have been overcharged in the past and 21 per cent feel they are currently being overcharged for banking services. Almost 2,000 firms were circulated and 424 companies responded to the survey, according to ISME.

More than 40 per cent said they had challenged their bank about overcharging. Almost two-thirds (61 per cent) got a repayment in full, while 27 per cent got repayment in part and the remainder said they received no satisfaction.

ISME argues that the survey proves conclusively that all the banks have been guilty of overcharging in the past. Of those who responded, 43 per cent bank mainly with AIB, 31 per cent with Bank of Ireland, 15 per cent with Ulster Bank and 9 per cent with National Irish Bank, while 2 per cent use other banks.

Perhaps unsurprisingly, the ISME survey found current suspicion of overcharging is highest among NIB customers at 32 per cent. Ulster Bank and AIB are the next highest at 22 per cent and 17 per cent respectively. Sixty-two per cent of AIB customers believe they were overcharged in the past, NIB customers at 59 per cent are the next largest group of customers who believe they were overcharged in the past.

ISME contends that it is the small and medium sector which has borne the brunt of overcharging rather than big business or personal customers. Many big businesses in the past had negotiated away their fees because of their size and financial clout, and so the associated costs were loaded onto the small and medium business sector, ISME claims.

Incoming ISME chairman, Mr Peter Faulkner, said small and medium sized businesses were engaged in dozens of banking transactions almost every day and it was very difficult to keep track of bank charges imposed on these transactions.

Mr Faulkner said legislation should be introduced to ensure that there were "punitive penalties" imposed on those found guilty of overcharging.

He also said that the statement by the Director of Consumer Affairs, Mr William Fagan, last week that no evidence of overcharging had been found during a spotcheck of banks could not be interpreted to mean that no overcharging took place.