Meade directed the Nationwide earlier this year to pay back redemption penalties to a customer who paid off his mortgage early, calling the charges "invalid" and "unlawful". The Nationwide challenged the ombudsman's decision unsuccessfully in the High Court.

Dissident member Brendan Burgess says the floodgates have now been opened to other customers who were charged similar penalties in the past.

The High Court decision has the potential to severely dent the windfalls of 12,000 to 15,000 that members are expecting when the Nationwide is sold, Burgess said.

He cited the tough line taken by the Financial Regulator on other overcharging scandals in recent years, when it forced institutions such as AIB and Bank of Ireland to write to thousands of customers to tell them they had been ripped off.

It is understood that the case involving the Nationwide's early redemption penalties is less clearcut.

"We're considering the implications of the settlement between the Financial Services Ombudsman and the Irish Nationwide, " said a spokesman for the regulator.

"We have a memorandum of understanding with the ombudsman and we're liaising with him."

Burgess said he is challenging other aspects of the Nationwide's lending practices, and is helping disgruntled borrowers to take a complaint to the ombudsman about penalty interest they were charged in the past when their mortgages fell into arrears. "A favourable ruling by the ombudsman would do huge damage to the value of the windfall, " he said.

Tomorrow's annual general meeting promises to be another stormy affair, with Burgess challenging chairman, Michael Walsh, for a seat on the board. Nationwide members will also be anxious for an update on the status of promised legislation, which the society claims is essential to ensure a quick sale to a bigger financial institution.