Cyprus’ Consumer Protection Service has completed a self-initiated investigation into Bank of Cyprus and Eurobank mortgage contracts, finding unfair terms that, it says, breach the principle of transparency and create a serious imbalance to the detriment of consumers. The probe began in July 2024 under the Consumer Protection Law of 2021.
Key findings
According to the decisions, the contracts included clauses that allowed banks to alter interest rates and calculation methodology without clear and objective criteria. The Service also flagged an overly broad right of lien over a consumer’s assets, as well as consolidation and set-off of accounts, including joint or deposit accounts, without prior notice.
Other issues cited were a term creating a presumption of notice to the consumer even if a letter is returned undelivered, with notice to one party deemed notice to all, the cost of property revaluation being passed to the consumer without clear criteria or limits, and the bank’s right to debit any consumer account for amounts owed without prior warning, exposing borrowers to surprise debits.
Sanctions and remedies
Taking into account the seriousness of the infringements, the Service’s Director imposed administrative fines of €800,000 on Bank of Cyprus and €600,000 on Eurobank, and ordered the immediate cessation of the infringements. The decisions have been published on the Service’s website. Any affected consumer retains the right to bring an action before the courts.
Bank of Cyprus
The Service decided that terms in the bank’s standard mortgage contract relating to interest-rate changes and methodology, general right of lien, account consolidation and set-off, bank notices to consumers, and property revaluation contravene Articles 50 and 52 of the 2021 Law and are therefore unfair.
These terms were included from June 2021 and applied to a large number of mortgages, 14,810 in total, primarily to borrowers aged 20 to 45. The Service stressed the social and economic significance of home loans, often secured on a borrower’s primary residence, and viewed the repeated imposition of such terms in long-term, high-value agreements as an aggravating factor.
Mitigating factors included the bank’s intent to amend the identified terms to comply with the legal and regulatory framework, its co-operation throughout the investigation, and improved drafting compared with older contracts, indicating an effort to align with the Law.
Eurobank
For Eurobank (formerly Hellenic Bank), the Service found that terms on repayment method, collateral and insurance, base lending rate, fees and charges, events of default for natural persons outside business activity, set-off and general right of lien, and general conditions breach Articles 50 and 52 and are therefore unfair and or non-transparent.
The Service noted the fundamental importance of mortgage credit in retail banking and the need for clear information about risks. It found the terms had been used systematically, appearing in 7,456 mortgage contracts since 8 August 2022.
As mitigating factors, the Service recorded no evidence of intent or targeted use against vulnerable groups, full co-operation during the probe, and the bank’s initiative to amend or delete the offending terms to ensure compliance. Drafting had also improved versus earlier contracts, suggesting a willingness to adapt and enhance consumer protection.
Both banks, the decisions note, co-operated and have indicated they intend to change the relevant terms. The watchdog’s orders require immediate compliance, while consumers affected by these clauses may seek redress in court.
