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Banks oppose interest rate regulation

A bill aimed at clamping down on banks that profiteer by arbitrarily increasing their margins has been rejected by the banks who argue that it will impede the execution of foreclosure procedures.

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.

Readers' comments

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  • demetri says:

    Mr. Ioannides president of Cyprus union of lawyers, yesterday said on TV that for years banks have always had been able to do anything, all with the blessing of the state, with laws that excluded them from prosecution when it came to charges interest rate hikes etc etc …on the subject of repossessions he said his office had written to the inland rev.opposing the govt’s plans, in a case purchaser has paid in full for property so property should be exempt from repossession, however proposed laws will re-enforce what’s there already ie if the developer owes the IRS the IRS’s claim will have to be settled before deeds can be issued, and lets say the developer can’t pay and the unfortunate buyer cannot either (although don’t see why they would have to pay developers capital gains!) then the repossession will take place. How fair is that.

  • Kal says:

    How unreasonable?? that would be like asking Dick Turpin to return his takings !!

  • Scruffy says:

    Surprise surprise. And this the organisation who will act responsibly when handed carte blanche on foreclosures?

  • Mike says:

    Banks opposing the opportunities to profiteer and bleed their customers dry, surely not! Perhaps it is time to get the money out, investigate other means of transactions and use them as you would a toilet – only when absolutely necessary.

    Fancy suggesting they would be precluded from raising rates whenever they fancied – very harsh. They must be permitted to fleece you whenever they chose otherwise how will they create the vast profits required to justify the eye watering bonuses they so obviously deserve. Look at the wonderful job they have done on behalf of consumers to date.

  • hani chehaiber says:

    The thieves that stole the country are doing it again.

    Interest rates should be libor + 0.25 Max 0.50 .And banking charges should be within conformity of banking practices.

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