Many cases have ended up in the Courts where the Court is called upon to decide, inter alia, whether terms contained in Loan Agreements are unfair, resulting in significant injustice to the Borrower.
An example of unfair terms could be seen in Loan Agreements between Banks and Borrowers as below:
- The Bank's right to charge the Borrower with banking fees, costs and charges from time to time and at its sole discretion.
- The right of the Bank to discontinue subsidizing or reducing the interest rate, in cases where the interest rate is subsidized or reduced, at its absolute discretion and at any time, and the right to unilaterally change interest and other charges borne by the Borrower.
- The right of the Bank to unilaterally modify the terms determining the repayment of the Loan and to increase the interest rate or charge additional default interest if the Borrower fails to pay any instalment on the specified date.
- To merge the Borrower's accounts with obligations owed to the Bank and to offset/ transfer amounts to any account of the Borrower for the purpose of repayment of part or all of his obligations or for any other reason, at any time and without notice to the Borrower.
Although this issue has been largely addressed by the European Court of Justice in several cases, Cypriot law does not oblige the Cypriot Courts to examine the issue of unfair clauses ex officio.
According to a Bill that has been submitted to the Legal Affairs Committee of the Parliament and will soon be submitted to the plenary for adoption, the "Consumer Protection Law of 2022" will oblige judges to examine the unfairness of any contractual clause that may be contained in a Contract that is the subject of a case under litigation.
It should be noted that the European Court of Justice has pointed out, inter alia, in its judgments that the National Court must examine ex officio the unfair nature of a contractual term falling within the scope of Directive 93/13, and that Member States must provide for appropriate and effective measures in order to stop the use of unfair terms.
Such a legislative change would completely alter the way Banks deal with Borrowers and enhance the administration of justice.
Pending the enactment of this legislation, the suspension of foreclosures is also being discussed in Parliament at the same time. Although it is not a long-term solution to the problem, it is for this reason that pressure is being exerted to complete the debate in the Legal Affairs Committee on the operation of the 'Foreclosures Court' (‘Δικαστήριο εκποιήσεων ').
The supporters of the proposed law on the operation of the Special Court are lobbying for the issue to be discussed again in the Parliamentary Committee on Legal Affairs, so that it can be brought to the plenary in November. In view of these discussions, therefore, the establishment of the Foreclosures Court, the most likely scenario is that auctions will be suspended until the Court is fully operational. The Ministry of Finance and the Central Bank are in favour of the operation of the Foreclosures Court. However, they believe that criteria for beneficiaries should be included. In addition, there are reservations regarding the 60-day period for the Courts to issue judgments under the proposal.
The Bill, inter alia, provides that the Court will, in addition to disputes in relation to the debit balance of the credit facility, hear any other disputes relating to credit facilities, guarantees and security. That is, it will hear disputes in relation to overdrafts and unfair covenants. These arrangements will cover first-lien Borrowers, Guarantors and Collateral Providers who have as collateral, on the loan taken out, the principal residence with an estimated value not exceeding €350,000.
The promotion of the above legislation will reverse and put the brakes on the Banks' procedures for "fast-track" foreclosure of properties and will give breathing space to Debtors-Borrowers: it will "force" the Banks to revise their plans and tactics in order to enter into negotiations with Debtors and offer real and viable solutions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.