Major changes to a draft law on the Financial Ombudsman and complaints procedures were discussed on Monday at the House Finance Committee Cyprus, with disagreement over whether the Ombudsman’s decisions should be binding on financial institutions.
Changes to deadlines and process
The Ministry of Finance said most amendments involve technical corrections, but some key changes affect deadlines.
The time to file a complaint with the Ombudsman would increase from 21 to 30 days, while the period for both sides to try to reach a solution would also be extended to 30 days. A new 60-day protection period from foreclosure is proposed, allowing borrowers to seek advice from insolvency experts.
Under the bill, complaints can be submitted once the borrower receives a formal notice. If a borrower breaches a restructuring agreement, lenders would be able to continue the loan sale process.
The law is expected to come into force on 1 June, aiming to give more time to both sides and offer a more flexible alternative to court action.
Dispute over binding decisions
A key issue is whether decisions by the Financial Ombudsman should become binding if accepted by the consumer.
Financial Ombudsman Valentina Georgiadou said this would help address the imbalance between consumers and financial institutions, which typically have greater resources and bargaining power.
She argued that decisions should be binding once accepted by the borrower, rather than requiring agreement from both sides, as this would make the system more effective. She also noted that this approach is allowed under EU rules on alternative dispute resolution.
Georgiadou warned that if courts can fully re-examine Ombudsman decisions, it could weaken the institution and discourage people from using it.
However, the Law Office of the Republic of Cyprus stressed that the constitutional right to access the courts must be protected.
Different proposals and reactions
Committee chair Christiana Erotokritou suggested a compromise, where decisions would be binding for disputes up to €20,000, with court appeals allowed only on procedural grounds.
The Cyprus Bar Association supported binding decisions, arguing that cases should not be examined twice if parties choose this process.
Banks and credit-acquiring companies opposed the idea, insisting they should retain the right to challenge both the process and substance of decisions in court.
On the other hand, borrower protection groups supported making decisions binding, at least where the borrower agrees, warning that constant legal challenges undermine the system.
Next steps
MPs also discussed separate legislative proposals on foreclosures, which are expected to go to a plenary session on 6 April.
Aristos Damianou of AKEL said his party’s priority is to strengthen borrowers’ access to the courts and protect primary residences.
Meanwhile, Alekos Tryfonides proposed raising the binding decision threshold to €50,000, while Stavros Papadouris said several proposals from his party have already been included in the bill.
Lawmakers are expected to finalise their positions in the coming weeks, with the aim of creating a balanced framework between borrowers, banks and credit management companies.
CNA