Significant legal and substantive changes to the bill under discussion concerning the Financial Commissioner and the complaints and foreclosures process are being examined in the House Finance Committee, with a key point of contention being whether the Commissioner's decisions should be binding for financial institutions.
The Committee discussed the issue with stakeholders during its Monday, 30 March session.
Extension of deadlines and changes to the procedure
On behalf of the Ministry of Finance, it was stated that most of the amendments concern legal technical corrections and revision of definitions. However, substantial interventions were also made, mainly regarding time frames and deadlines.
Among other things, the 21-day deadline is increased to 30 days for appealing to the Commissioner after receiving a notice, the period within which the parties involved must seek a solution is extended from 15 to 30 days, and a 60-day foreclosure protection period is introduced, during which the borrower will be able to contact an insolvency advisor.
At the same time, the request to the Commissioner will be submitted from the moment the borrower receives the Form I letter. A provision was also added according to which, if an eligible debtor violates any term of the restructuring agreement, the licensed institution will be able to continue the process of selling the loan.
The new text also refers to the grounds for appeal against the decisions of the Financial Commissioner, mainly in relation to financial institutions.
The implementation of the law is set for 1 June, while, as pointed out by the Ministry of Finance, the basic philosophy of the changes is to give more time to the parties and to make the process more flexible in relation to recourse to the courts.
Focus on the binding nature of decisions
A central issue in the discussion was the proposal that the decisions of the Financial Commissioner be binding if they are accepted by the consumer.
Financial Commissioner Valentina Georgiadou focused particularly on the issue of the binding nature of the institution's decisions, pointing out that the proposal to make decisions binding when they are accepted by the consumer attempts to address the existing imbalance between citizens and financial companies.
As she explained, this possibility essentially strengthens the position of the consumer, as today financial institutions clearly have stronger negotiating and economic power. In her view, a framework should be created in which the Commissioner's decisions become binding if they are accepted by the borrower, and not only if there is consent from both parties, as this, in practice, nullifies the usefulness of the institution.
She noted that this regulation is in line with the European directive on alternative dispute resolution, which leaves member states the discretion to determine whether the decisions of the respective authorities will be binding or not. She clarified, however, that the specific provisions concern exclusively the examination of complaints and disputes and are not related to the foreclosure process.
Referring to the right to appeal to the courts, Georgiadou stressed that clear limitations should be placed on the grounds on which a party can challenge a decision, in order to protect the institution from the risk of being undermined. As she stated, the aim is for the Office of the Financial Commissioner to function as a substantive first stage of dispute resolution, prior to judicial proceedings, and not simply as an intermediate step without practical effect.
She also stressed that when the parties choose to challenge the amount of monetary compensation awarded before a court, the very substance of the case is essentially being reexamined. This, she said, alters the institution's mediating nature and turns the process into a parallel judicial decision.
The Commissioner pointed out that the institution's main role is to mediate and find compromise solutions, pointing out that courts, due to the strict evidentiary and procedural rules that govern them, often do not have the flexibility to determine compensation or arrangements with the same practical approach that the Commissioner can adopt.
In conclusion, she warned that, if the courts are allowed to fully review the Commissioner's decisions on the merits and not just on the procedure, there is a serious risk of weakening and ultimately dissolving the institution, as citizens will cease to consider it an effective means of resolving disputes.
On the contrary, the Law Office of the Republic emphasised that the constitutional right of access to justice cannot be taken away from any party. As pointed out, the goal of the institution is the out-of-court resolution of disputes, but the possibility of judicial appeal must remain.
Proposals for partial binding and different approaches
The Chair of the Committee, DIKO MP Christiana Erotokritou, suggested that for disputes up to €20,000, the decisions should be binding on the financial institution, with the possibility of appeal only for procedural issues and not for substantive ones.
On behalf of the Cyprus Bar Association, Christos Karas argued that it is legally pointless for an issue to be examined twice and that, if the parties choose to appeal to the institution, they should also accept the binding nature of the decision, with the possibility of judicial challenge only for legal error or procedural issues.
Reference was also made to practices in other countries, where appeals against decisions of corresponding authorities are examined at the highest level and not by provincial courts.
Reactions from banks and credit acquisition companies
The Association of Cyprus Banks expressed disagreement with the binding nature of the decisions, stressing that the right of credit institutions to challenge both the process and the substance of a decision in court must remain. A similar position was expressed by the Association of Credit Acquiring Companies & Services.
On the other hand, borrower protection organizations also argued in favor of bindingness, at least in cases where the borrower accepts the decision, pointing out that most disputes exceed the 20,000 euro limit and that challenging each decision undermines the effectiveness of the institution.
The Director of the Insolvency Department, Celia Heraclidou, pointed out that the effectiveness of any legislative regulation also depends on the existence of adequate infrastructure and supervisory mechanisms. As she noted, in cases of non-compliance of financial institutions, there are already supervisory tools through the Central Bank and other mechanisms and there is no need for legislative bindingness.
The Ministry of Finance representative emphasised that, in the event that no agreement is reached between the parties, submitting an application to the Commissioner remains a more flexible and less time-consuming process compared to filing a lawsuit, while the philosophy of the bill remains the preservation of the right to appeal to the courts, while strengthening the role of the Commissioner.
At the same time, the members of the Finance Committee discussed the future of the legislative proposals they submitted on the divestitures and are expected to be brought to the Plenary during its 6 April session.
(Source: InBusinessNews)
