The Consumer Protection Service has launched an independent investigation into potentially abusive clauses in standard mortgage agreements used by all banking institutions in Cyprus.
This inquiry is conducted under the provisions of the Consumer Protection Law (Law 112(1)/2021) with findings expected in the coming months.
The Service has also filed court injunctions against around 50 property development companies and six banks, in line with earlier administrative rulings. These applications resulted from complaints alleging the use of abusive contract terms. This was confirmed in a letter from Consumer Protection Service Director Konstantinos Karagiogis, in response to a question from MP Stavros Papadouris of the Green Movement, during a Parliamentary Commerce Committee session on October 22, 2024, focused on inflation and government policy.
Mr. Papadouris requested an update on the progress of the Service’s administrative decisions – some dating back a decade – within its legal authority over abusive clauses in consumer contracts.
Mr. Karagiogis highlighted that three injunction applications remain pending in the Nicosia District Court, with decisions on two anticipated soon, as proceedings have concluded. He also noted that, as of June 16, 2020, a court order mandated Societe Generale Bank – Cyprus Limited to immediately cease and refrain from using specific terms in its mortgage contracts, though this is currently under appeal in the Supreme Court.
Delays in resolving cases
Speaking to StockWatch, Mr. Papadouris expressed concern over delays in case resolutions and indicated plans to request a committee review of this issue. Many cases handled by the Consumer Protection Service have been pending since 2014. He added that these delays cannot fully account for the extended time since the Service issued its rulings, with the judicial process yet to conclude. He pointed out that these decisions are available on the Service’s website, dating back to mid-2014.
History of abusive clauses legislation & decisions
Legislation addressing abusive clauses was enacted in 1997, with the Consumer Protection Service’s first decision on banking contracts in 2016, impacting thousands of borrowers.
This decision followed an EU Commission action against Cyprus for failing to enforce the abusive clauses legislation effectively. The first court ruling was issued on February 25, 2021, ordering the immediate cessation of thirteen clauses in a Societe Generale mortgage agreement. That same year, the framework for abusive clauses was reinforced and supplemented by further consumer protection legislation.
Addressing gaps in abusive clauses legislation
Despite these efforts, gaps remain in the current legislation. To address this, Mr. Papadouris submitted a bill to the House of Representatives in early September, seeking additional protections for consumers against abusive clauses in loan agreements.
The proposed bill aims to protect borrowers who signed contracts before 2021. The 1996 Abusive Clauses Law was repealed by the new 2021 Consumer Protection Law, which aligns with the relevant EU Directive. However, the applicable law depends on when the loan agreement was signed: agreements made before May 12, 2021, are subject to the repealed 1996 law, while those signed after fall under the current Consumer Protection Law.
The bill aims to amend the Consumer Protection Law to ensure that contracts established before the new law took effect – and still active – are reviewed under the provisions of the current law, which includes safeguards against abusive clauses.
