AIB is to refund 11,500 customers over discrepancies relating to the insurance products sold with credit cards.
The bank said it found the discrepancies after it looked into complaints made by customers last year and will be handing back a total of €3.1m.
On average it will be repaying customers €270 each with letters are being issued to customers in the coming days.
AIB found it had incorrectly charged customers for payment protection, travel insurance and card protection when customers provided contradictory information on application forms.
The bank also failed to check with customers when they provided contradictory information on their employment status.
The bank said that customers whose credit card accounts were in arrears from June 2009 were advised that their payment protection policy would be cancelled following two consecutive missed payments.
Unless the customer missed a third consecutive payment, the policy was not cancelled and the customer continued to be insured.
The bank says that the review programme was undertaken in line with agreed processes relating to customer refunds. In any case where doubt existed, the bank said, the benefit of doubt was given to the customer.
The bank says the fault lies in the bank's internal verification systems, and that changes are being implemented to prevent any reoccurrence.
The letter being issued to customers in the coming days will include contact details for a dedicated helpline at AIB's contact centre.