ASSOCIATIONS representing distressed borrowers have threatened to freeze all loan payments by the end of June in protest over the banks’ practice of taking defaulting borrowers to court before exhausting loan restructuring options.
According to the head of the Borrowers’ Association, Kostas Melas, banks are failing to comply with the directives issued by the Central Bank (CBC) on loan restructuring procedures. .
Following a meeting this week with House president Yiannakis Omirou, during which he briefed Omirou on borrowers’ complaints, Melas said the problems faced by borrowers remain unresolved and relate to lenders’ hostile attitude towards distressed borrowers. He named the Bank of Cyprus, Alpha Bank and the co-operatives as systematically failing to comply with the directives.
“Banks continue to engage courts and arbiters in order to secure the amounts they claim they are owed before attempting to restructure loans,” he said. “The cooperative banks have recently created a restructuring department, but what can they tell us about the cases they refer to arbitration? It is outrageous that the co-ops claim to have started restructuring loans, while referring cases to arbitration as late as June.”
Melas explained that despite a CBC directive urging banks to consider every restructuring option when handling distressed borrowers, they have tried to circumvent due process.
“Let them explain how many borrowers were referred to arbitration since the beginning of the year and why,” he insisted.
Borrowers made loans in good faith based on their income and other circumstances at the time, but the state’s negligence and the banks’ lack of accountability caused the financial meltdown that borrowers are, once again asked to repay, according to Melas.
“This has to stop,” he warned. “All the associations have agreed that unless banks’ attitudes change by the end of June, we will start taking action, and that will be painful, especially to the banks.”
Asked what measures might be taken, Melas revealed that the prevailing thought at this point is to withdraw all cooperation by borrowers, leaving the banks with no option than to take them all to court individually.
“I can assure you, borrowers will be the winners of such an exchange,” Melas said.
Acknowledging this would be far from an ideal solution, he said it was only one of the measures being considered in order to put pressure on the government and the CBC to set the banks straight. Melas argued that failure to comply with the CBC’s directives is against the law and banks could be prosecuted, while the Central Bank also has the power to impose administrative fines.
On his part, Omirou said that the views of the borrowers’ association echo those of the Cyprus Consumer Association, the Bondholders’ Association, the Association for the Protection of Primary Residences, and the Small Business Coalition.
“All these groups feel that banks are not compliant with the CBC’s directives on arrears management and loan restructurings,” Omirou said. “Banks cannot continue to act unchecked.”