Filenews 12 March 2023 - by Eleftheria Paizanou
The Legal Service may have raised expectations among the members of the House Standing Committee on Commerce a few days ago that the legal and other obstacles identified in the bills aimed at regulating the procedures by which banks impose charges on consumers will be overcome, but the Consumer Protection Service of the Ministry of Energy continues to identify pitfalls.
This is despite the fact that the service fully recognizes the need to strengthen and modernize the legislative framework for consumer protection, regarding contracts concluded with credit institutions.
The two proposals
The strengthening of borrowers' rights through the contracts they conclude with banks may come with the two bills of DISY and AKEL, which will be attempted to be brought to the plenary before Easter.
The first proposal for a law, submitted by DISY, amends the Law on Consumer Protection, so that banks acquire the obligation, before and during contracts with consumers, to apply a code of protection of customers' rights.
The second draft law, by AKEL, provides for an amendment to the Law on the Comparability of Fees, so as to broaden the definition of consumer to include micro-enterprises and the self-employed (currently covering only natural persons), so that they have the same rights as natural persons to open payment accounts with basic features (LPBX), that have lower fees. In addition, consumers will be able to maintain special accounts (LPBX) with more credit institutions and not just one, as is currently the case. It is worth noting that when the two bills are approved, the Ecologists will submit their own bill, so that banks are obliged to apply the code of protection of consumer rights.
Where do the reservations focus
The reservations of the Consumer Protection Service focus on the proposal for a law of DISY, which establishes a code for the protection of consumer rights. The technocrats of the Ministry of Energy, studying the obligations that banks will have through this code, concluded that these are already covered by the special legislation implemented by the Consumer Protection Service. Essentially, they are covered by five laws concerning consumer credit agreements, credit agreements for consumers in relation to residential immovable property, consumer protection, distance marketing of financial services to consumers and alternative dispute resolution for consumer disputes.
At the same time, the service indicates that the other obligations that will stem from the code that will be adopted are covered by other special legislation, for the implementation of which are some other competent authorities, such as the Central Bank, the Ministry of Finance and the Commissioner for the Protection of Personal Data.
What does the European Directive provide for?
In addition, the Consumer Protection Agency indicates that, in the context of strengthening consumer rights, the European Commission is revising the Consumer Credit Directive. According to the Directive, information on credits will now be adapted to digital media. Also, the rules on the basis of which the creditworthiness of consumers is assessed will be improved to avoid cases of over-indebtedness. At the same time, Member States should promote financial education and ensure that advice is provided to consumers in debt situations. It is estimated that, with the adoption of the European directive, the obligations imposed on credit institutions by the draft law will overlap to a much greater extent.
It puts the law first for consumers
It is worth mentioning that the Consumer Protection Service of the Ministry of Commerce also proposes the law approved by the Parliament in 2021 and which strengthens the legal framework of the service. In the new legal framework, six horizontal laws were consolidated, which regulate issues of protection of consumers' economic interests, while strengthening and strengthening the powers of the service, in order to better and more effectively apply the laws. Furthermore, according to the agency, the legislation is mostly a transposition into national law of European Directives of maximum harmonization. In fact, it indicates that the draft law seeks vertical unification of legislation and concerns only banks.
The yes and the no
At the same time, the service proceeds with suggestions for individual provisions included in the law proposal of DISY. Regarding the definition of the code of conduct, it is emphasized that the Law on Consumer Protection considers any agreement or set of rules not imposed by a legislative, regulatory or administrative provision of a Member State that determines, with regard to one or more specific commercial practices or business sectors, the behaviour of traders who undertake to be bound by the code.
Regarding the provision with which the Consumer Service will undertake to prepare a report every two years to the Parliamentary Committee on Commerce, in which the decrees issued by the courts regarding unfair terms in contracts will be recorded, he emphasizes that he has no objection. In relation to the extension of the list of terms considered unfair and illegal, the competent authority has no objection to the inclusion of additional clauses, which could potentially be considered unfair, provided that it points out that the correct assessment and wording has been made.
Banks' disagreements over proposals
Strong disagreements have also been expressed by the Association of Banks, in relation to the AKEL law proposal. He argues that 22 out of the 27 EU member states open LPBX only for natural persons while holding only one account with one credit institution, as in Cyprus.
In addition, it stresses that the modification of the definition of consumer as well as the inclusion of only certain businesses raises questions in relation to the creation of unequal treatment of other businesses that are not covered. It is also likely to violate the acquis communautaire, as it creates a favourable environment for Cypriot businesses while distorting competition in the single market.
In addition, the banks argue that there is a possibility of violation of Article 26 of the Constitution, since, as they point out, several decisions of the Supreme Court in relation to other legislation that affected banking operations and contracts, have made it clear that this article protects the freedom to determine the content of contracts and where restrictions and interventions were made to the content of contracts, they were deemed unconstitutional.
How the debate will proceed
Reservations about both bills were expressed by both the Central Bank and the Ministry of Finance. On Tuesday, discussion of the two proposals will continue in the House Trade Committee to try to remove legal obstacles. The changes to be promoted by the Trade Committee will be based on the positions expressed by the Legal Service. In other words, consideration will be given to whether the definition of consumer will be included in the scope of the law, and legislation regulating micro-enterprises in relation to the acquisition of 'basic accounts' will be considered.
