Around 40,000 Allied Irish Banks (AIB) customers have been overcharged to the tune of four million euro, it has been revealed.

The bank discovered it had applied business rates to some personal account holders and vice-versa for several years.

It is estimated tens of thousands of customers can expect refunds of an average 100 euro each after being hit with the increased fees.

"An element of the account classification process has been found to be vulnerable in some cases, resulting in accounts being mistakenly entered into the wrong category," the bank said.

"This means that some personal accounts may have been classified as business and some business accounts as personal."

The overcharging was identified in November 2008 and the Financial Regulator informed.

AIB described the error as "incorrect classification" and warned it may have occurred over a number of years.

In a statement AIB said: "Until the full process is complete, it is not possible to quantify exactly how many accounts are affected and what the total refund amount will be.

"However, currently it is estimated that the number of accounts requiring refund would be 40,000 and the total refund would be four million euro plus compensatory interest."

The Financial Regulator has given AIB until the end of the year to notify all affected customers and issue refunds by March 2011.