MPs on Monday discussed a bill concerning the responsibilities of the financial commissioner and procedures for complaints and foreclosures, with a dispute over whether the commissioner’s decisions should be binding for the banks.
The bills are expected to be submitted to the plenum for voting on April 6.
During Monday’s House finance committee discussion, a finance ministry representative said most amendments included in the bill concerned legal technical details and definitions, mainly concerning timeframes.
For example, the 21-day deadline for someone to appeal to the commissioner after receiving a notice was extended to 30 days, after which they had 30 days instead of 15 to seek a solution and a 60-day protection from foreclosure.
A clause is also included allowing the bank to go ahead with the selling of the loan if the debtor violates any of the terms of the restructuring of his loan.
Reference is also made to the ground of an appeal against the commissioner’s rulings, mainly concerning the banks.
The finance ministry said the main philosophy of the amendments was to give the parties more time and make the process more flexible in relation to recourse to the courts.
If passed, the law is to come into force on June 1.
A main point of Monday’s discussions was to make the financial commissioner’s decisions binding if accepted by the consumer.
Financial Commissioner Valentina Georgiades said this was to address the existing imbalance between individuals and banks.
This, she said, would strengthen the position of the consumer and was in line with the European directive on alternative dispute resolution.
Referring to the right to appeal to the courts, Georgiades said that clear limitations should be placed on the grounds on which a party can challenge a decision, in order to protect the institution from the risk of being undermined.
The commissioner would thus function as a substantive first stage of dispute resolution, prior to judicial proceedings.
Georgiades warned that, if the courts were allowed to fully review the commissioner’s decisions on the merits and not just on the procedure, there was a serious risk of weakening and ultimately dissolving the institution, as people would cease to consider it an effective means of resolving disputes.
However, the Law Office said the constitutional right of access to justice could not be taken away from any party and thus the possibility of judicial appeal must remain.
Committee chairwoman Diko MP Christiana Erotokritou suggested that for disputes up to €20,000, the decisions should be binding for the bank.
Cyprus Bar Association representative Christos Karas argued that it was legally pointless for an issue to be examined twice and that, if the parties chose to appeal to the commissioner, they should also accept the binding nature of the decision, with the possibility of judicial challenge only for legal error or procedural issues.
Reference was also made to practices in other countries, where appeals against decisions of corresponding authorities are examined at the highest level and not by provincial courts.
The Banking Association expressed disagreement with the binding nature of the decisions, stressing that the right of banks to judicially challenge both the process and the substance of a decision must remain.
A similar position was expressed by the Association of Credit Acquiring Companies and Servicers.
On the other hand, borrower protection organisations argued in favour of the commissioner’s decisions being binding for the banks, at least in cases where the borrower accepts the decision, pointing out that most disputes exceeded the €20,000 limit.
Insolvency Department director Celia Heraclides pointed out that the effectiveness of any legislative regulation also depended on the existence of adequate infrastructure and supervisory mechanisms.
In cases of non-compliance of financial institutions, there were already supervisory tools through the Central Bank and other mechanisms, she said.
The finance ministry stressed that, in the event that no agreement was reached between the parties, submitting an application to the commissioner remained a more flexible and less time-consuming process compared to filing a lawsuit, while the philosophy of the bill remains the preservation of the right to appeal to the courts, while strengthening the role of the commissioner.
Akel MP Aristos Damianou clarified that the priority remained the promotion of the legislative proposals submitted by Akel, which touch on the “essence of the problem” of foreclosures.
These proposals, he said, focused on restoring the right of borrowers and guarantors to have unhindered access to justice, so that they could secure court orders to prevent foreclosures that they considered unfair, especially in cases of abusive clauses or questioning of balances.
