BANKS HAVE disagreed with a government bill regulating charges and interest rates arguing it will hinder the implementation of the foreclosures procedure.
“Its provisions can be exploited by people who refuse to co-operate,” bank association representative Demetra Plati told MPs at the House finance committee on Thursday.
The government’s intention, according to the finance minister, is to regulate the fluctuation of interest rates from now on.
“The intention is to set the lending rate from now on. With the approval of the bill, banks will not be able to raise the rates unilaterally,” he told the committee, meeting to discuss the foreclosure legislation.
However, the minister added, it was not illegal if a bank charges 3.0 per cent in late payment interest last year. If that rate was unreasonable though – 10 per cent – then borrowers have the right to go to court.
The bill puts a 2.0 per cent cap on late payment interest.
The bank association however, disagreed with the bill in its entirety because saying it would have negative effects on the banks while the benefits for borrowers were doubtful.
Plati said if the banks cannot raise the rate they would probably set one as high as possible from the onset in a bid to cover any future risks.
Banks also disagreed with sending borrowers separate letters each time the basic rate changed, saying that could be done through the monthly statements.
The late interest cap was also a sticking point as sometimes the cost for the bank could be over 2.0 per cent.
Banks also disagreed with provisions precluding them from including a right to raise rates during the course of the contract, saying this could be unconstitutional.
Attorney-general Costas Clerides said that the bill did not include provisions for banks to return excessive charges accepted and paid by customers in the past. And it was not yet clear if the interest, which has been charged but not yet paid, would be written off, Clerides said.
The attorney-general said it would not be easy to make the bill retroactive without first carrying out an impact study.