Bank of Ireland has refunded €1m to 1,500 customers after an internal review discovered they had taken out insurance with credit cards they could not claim on.
The payment comes to an average of around €660 per customer.
In some instances the customers paid for the insurance although they were not eligible to purchase it.
Payment protection insurance pays credit card bills in the event of illness or loss employment.
The development was revealed by The Consumer Show on RTÉ.
The bank says it has changed its systems to ensure only those who are entitled to take out the insurance can purchase it.
The product - Payment Protection Insurance (PPI) - covers repayments on loans, mortgages and credit cards if people fall ill or lose their jobs.
But it appears many people bought it even though they had no income and could not make a claim.
One Bank of Ireland customer told The Consumer Show that she bought the policy in 2001 when she was a student and clearly had no income to protect.
She received a payout of just over €1,000. The payouts to others depends on how long they had the policies, a Bank of Ireland spokeswoman said.
In a letter to her, the bank stated: "Following an internal review of our systems and processes we have identified a number of customers with credit card Payment Protection (PPI) insurance who were not eligible to take out the policy with us when their credit card was opened because they were not in full time employment as set out in the policy at the time and consequently would have been unable to make a successful claim on the policy."
Bank of Ireland
In a statement this evening the bank confirmed that it had issued refunds to 1,514 credit card PPI customers. It said that it was the bank's policy to constantly check and issue refunds with fair value interest and that it continues to do so when appropriate.
It says that the Central Bank of Ireland has been advised, and that it is awaiting the publication of the Central Bank's findings on the issue.
Allied Irish Bank
Late last month, AIB disclosed that it is to refund €3.1m in payment protection insurance premiums to 11,500 customers - an average of €270 each - after the bank uncovered a "breakdown in its verification systems".
The Central Bank is conducting a review of 276,000 PPI policies sold in 2008 and 2009 with results due out at the end of this year.
