ALPHA BANK Cyprus has been hit with an administrative fine of €250,000 by the Cyprus Consumer and Protection Service (CCPS) for its business practices relating to mortgage contracts.
‘Low cost’ Swiss franc loans were sold to around 11,000 of home buyers, both Cypriots and non-Cypriots, by Cypriot banks and their agents during the island’s property boom.
Banks found Swiss franc loans easy to sell as the interest rate was much lower than loans denominated in Cyprus pounds or Sterling. But borrowers have seen their monthly loan repayments soar as the Swiss franc strengthened against other currencies, in some cases more than doubling.
Many home buyers who were sold Swiss franc loans have signed-up to various legal groups that are taking action against a number of Cypriot banks (including Alpha Bank Cyprus) alleging that the Swiss franc loans were mis-sold. They are currently waiting for the final setting down of firm trial dates.
In December last year the CCPS found Alpha Bank Cyprus culpable of dealing unfairly with two of its clients in relation to a loan that was converted to Swiss francs without their knowledge. At that time DISY MP Zacharias Zachariou, who chairs the House Commerce Committee, said the decision was a tool that could be used by the plaintiff in a court. Zachariou spoke of a “landmark decision” that would have ramifications for all banks engaging in unfair practices.
The latest decision to impose an administrative fine of €250,000 on Alpha Bank Cyprus by the CCPS is another “landmark decision”.
The CCPS concluded that the bank’s mortgage contracts breach the Law of Unfair Commercial Practices Business to Consumers Law of 2007 (N. 103 (I) / 2007) on seven points, including:
Lack of information consumers receive about loans in foreign currency and the risks associated with those loans.
Lack of clarity in contract concerning the disbursement of the loan, early repayment charges paid by the borrower, and the liability for customer charges, costs and expenses.
Use of a contractual term where the consumer is said to confirm that the loan agreement is absolutely legitimate.
When a borrower lodges a complaint against the bank, the case must be referred to Cypriot courts. But when a bank has a complaint, it can take legal action against the customer in any court in any country.
The CCPS’ decision notes that, contrary to what Alpha Bank claims, the administrative fine will not interfere with the court actions pending between borrowers and the bank. (However, the CCPS’ decision should add weight to their legal arguments).
Cyprus property news