Ulster Bank has confirmed that it has been contacting customers about an error which occurred when personal loans were re-paid early in the period up to 2005.

The bank is set to return just over €4m to around 25,000 customers it mistakenly overcharged on payment protection policies. Ulster Bank said some customers did not receive a full refund of insurance policies for the remaining terms of their loans.

The policies involved repay customers' loans if they cannot meet repayments due to permanent disability, redundancy or death.

The bank said the average refund was €170, adding that it had kept the Financial Regulator fully informed. A help line - 1800-251010 - has been set up for customers with any queries.

All customers affected will receive a refund with compound interest. Ulster Bank also said  steps had been taken to prevent a recurrence of the error.

Just over two years ago, Bank of Ireland admitted to having overcharged 65,000 customers to the tune of €15m on payment protection policies.