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Swiss francs loan landmark decision

Swiss frannc loan agreement

THE COMMERCE ministry’s Competition and Consumer Protection Service has found Alpha Bank in Cyprus culpable of dealing unfairly with two of its clients.

The two persons, both permanent UK residents, took out a loan from Alpha Bank for the purpose of re-financing a previous loan for the purchase of an apartment.

The loan was issued in Swiss francs, but the plaintiffs claim that the conversion to another currency was made unbeknownst to them, based on a power of attorney they had concluded with a Cypriot lawyer.

They moreover claimed that they were not informed of the exchange-rate risks of the loan, nor of the other terms of the loan agreement.

The subsequent strengthening of the Swiss franc led to “a significant increase in the un-matured principal balance,” as a result of which the loan became non-performing.

Specifically, on March 3, 2009 the bank issued the two plaintiffs, plus another person, a housing loan in Swiss francs for CHF 217,000. This was to replace a previous loan of €124,500 taken out for the purchase of an apartment.

The loan agreement in Swiss francs was signed by the plaintiffs’ lawyer, to whom they had ceded power of attorney.

During the commerce ministry’s investigation of the complaint, the bank conceded it did not provide the plaintiffs pre-contractual information that the loan currency would be converted into Swiss francs. The bank’s position was that this was responsibility of the borrowers’ legal representatives.

In its decision, the Competition and Consumer Protection Service found the loan agreement to be in breach of the law on unfair terms in consumer contracts and also in breach of the principle of transparency.

However, the service did not slap Alpha Bank with a fine, nor did it make it explicit that the lender was legally liable.

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.

He said the complaint in question pertains to lack of transparency in a contract, conversion into Swiss francs without informing the borrower, and whether a bank has the right to cancel a contract without notifying the borrower.

In addition, the complaint and the decision raised another question. When a borrower lodges a complaint against the bank, the case is referable only to Cypriot courts. But when a bank has a complaint, it can take legal action against the customer in any court in any country.

Zachariou said parliament “was right all along about the unfair terms of contract against borrowers, and my statement today is intended to make borrowers aware of a decision that relates to a specific bank, all of whose contracts are like that.”

According to the MP, the case in question would end up in court.

“With these kinds of contracts, borrowers are at the mercy of the banks’ appetites,” he said.

Swiss francs loan ruling

CCPS Decision 56/2015 Alpha Bank Cyprus Ltd (Greek)