Fianna Fáil has called for “punitive action” to be taken following revelations thousand’s of Irish customers may have been wrongly denied tracker mortgages.

The revelations emerged as part of an industry-wide probe initiated by the Central Bank.

Central Bank governor Philip Lane told the Irish Independent almost 10,000 mortgage holders may have been overcharged or had their tracker rates removed.

Up to 15 lenders are involved in the probe and are now facing the prospect of being forced to restore the valuable tracker rates and make repayments.

With potential average repayments of around €25,000 per customer - the eventual bill could top €1bn.

Mr Lane said about 8,200 homeowners who were overcharged or had their tracker removed have already been contacted by lenders and warned that the final total could be more than 10,000.

Bank of Ireland has issued an apology to customers after the probe revealed it had overcharged 3,916 customers while a further 602 customers were wrongly denied a tracker rate.

The bank has committed to begin refunding customers who overpaid interest in the first quarter of 2017.

Fianna Fáil finance spokesperson, Michael McGrath said the scandal requires a “forceful response” and warned the response must priorities the interests of consumers.

He said it has become “increasingly clear” that the practice of denying customers their right to a tracker interest rate was “systemic and widespread” across the industry.

"While the full picture is still only emerging, it is now distinctly possible that well north of 10,000 mortgage holders were wrongly denied a tracker mortgage rate with thousands of others being overcharged on their tracker rate,” said Deputy McGrath.

“This practice has changed the lives of thousands of families for the worse and has inflicted on some families the devastation of losing their home.

The Cork south-central TD said it is “not credible to argue that this was anything other than a wilful abuse of the contractual rights of customers by the main lenders in Ireland.”

"The Central Bank has to send a powerful signal that the abuse of customers in this way will simply not be tolerated and will be met with punitive regulatory sanctions,” he said.

"The Central Bank can equally not ignore the question of who knew what about this practice across the banking system and this has to part of the probe.

“Compensating customers and restoring tracker rates is the most urgent issue but we need to know how this practice developed in the first place, what was known at board and senior executive level and who made the key decisions.”

Philip Lane, the Central Bank Governor, is due before the Oireachtas Finance Committee next Tuesday where he will be expected to provide further detail on the probe.

After a previous examination in 2010 Bank of Ireland restored tracker rates for 2,100 accounts.

AIB, Ulster Bank and Permanent TSB are dealing with similar issues and reviewing their tracker policies.