Ulster Bank admitted yesterday that it would have to refund more than €4.2 million to customers it overcharged two years ago. Claire Shoesmithreports.

In a statement, the bank admitted it had overcharged about 25,000 people in relation to payment protection policies. It said it had been contacting customers regarding the error, which relates to personal loans that were repaid early in the period up to 2005. It said some customers mistakenly didn't receive a full refund of insurance policies for the remaining terms of their loans.

The bank expects to refund about €170 on average to each affected customer. This will include interest payments.

In the statement, the bank apologised for the inconvenience and said all the necessary steps had been taken to prevent a recurrence of the error.

This isn't the first such case to emerge. In 2005, Bank of Ireland revealed it had mistakenly overcharged 65,000 customers on payment protection insurance since 1989, leading the bank to repay €18 million in charges and interest.

National Irish Bank is also paying back €11 million for improper charges, while AIB is repaying €34 million for foreign exchange overcharging.

It is not the first time for Ulster Bank either. Only three months ago its subsidiary First Active was forced to inform thousands of its mortgage protection insurance customers they were due a refund after an overcharging error that was detected at the start of 2004.