Filenews 24 October 2024
By a majority, Parliament passed a package of bills to harmonize with European Directive 2021/2167, which establishes a common framework for credit servicers and purchasers.
The legislation aims to create secondary markets for Non-Performing Loans (NPLs), authorise and supervise credit servicers and ensure that the sale of loans does not undermine borrowers' rights.
Most of the seven pieces of legislation voted in favour of DISY, DIKO, EDEK and DEA, while AKEL, ELAM and Ecologists voted against. Individual Socialist MP Kostis Efstathiou voted against, while independent MP Alexandra Attalidou abstained. Most bills were passed by 26 MPs in favour, 17 against with one abstention, with the exception of the anti-money laundering bill which was passed by 44 votes in favour and one against.
Two amendments were also adopted: one signed by AKEL, ELAM, EDEK, DIPA and Ecologists prohibits the sale of performing loans, while AKEL's second amendment allows the Central Bank of Cyprus (CBC) for reasons of national interest to refuse authorisation or revoke a licence to a credit servicer, the appointment of a member of the Board of Directors of credit servicing companies.
In addition, the new framework of legislation enables the provision of information on real estate from the Land Registry to credit servicers.
Credit facility managers are also obliged to comply with the Anti-Money Laundering Act.
It also includes provisions on the protection of personal data, in accordance with the recommendations of the Commissioner for Data Protection and provisions concerning the information of the borrower before the sale of his performing credit and his right to repurchase it. The legal framework for the purchase and sale of credit facilities is also aligned with the new framework for uniform management, abolishing the obligation to license credit acquiring companies and maintaining a minimum capital of €100,000.
DISY MP Onoufrios Koullas said that this is a harmonizing directive that does not touch the effort to reduce NPLs, is not related to unfair terms, has nothing to do with the Financial Commissioner, does not change the terms of the loan at all and ensures that the terms of the loan must be the same, while it does not deal with the framework of foreclosures.
He noted that Cyprus is under infringement proceedings and must be harmonized and that if voted down, Cyprus will continue to have the existing framework for buying and selling loans.
He also said that 90% would not change anything particularly with today's vote.
At the same time, he noted that AKEL and ELAM are aligned on the issue as well as on other anti-European issues, while DISY's effort is the stability of the economy for the good of the country.
AKEL's Parliamentary Spokesman, George Loucaides, said that the Financial Commissioner expressed reservations about allowing individuals to act as credit purchasers and including performing loans in portfolios for sale.
He added that in Cyprus for "vulture companies" not only are tools not removed at the expense of borrowers, but they are offered to them, adding that they are magnifying the imbalance that exists.
He also criticised the fact that while citizens are struggling, financial institutions are making super-profits from rising interest rates. He said that the House in this case is simply applauding this state of affairs in favor of a handful of companies that make this money from Cyprus and are deposited as profits somewhere abroad, mainly in the US.
He also said that by voting against the bills they will come back with proposals and suggestions that will protect borrowers.
Speaking before the plenary, AKEL MP Andreas Kafkalias expressed his disagreement with the bill package, saying that critical issues concerning the protection of borrowers and guarantors, such as unfair commercial practices, unfair terms and ensuring unhindered access to justice, are not regulated.
As he said, effective mechanisms for the control of purchase and sale transactions are lacking, since the minimum protection that existed through the existing legislation for restrictions on grounds of public national interest has been deleted.
Regarding the amendments, he said that AKEL's first amendment reinstates this regulation, while the amendment they co-sign with other parties excludes performing loans from their inclusion in loan sale packages. He noted that the European directive does not oblige Cyprus to include performing loans.
He also noted that there is no obligation for capital requirements of credit acquiring companies, while he also referred to the lack of a safeguard for sales to natural persons.
DIKO MP Christiana Erotokritou said that Cyprus is part of a larger family and must be harmonized with European legislation.
It took note of the Financial Commissioner's statement to the House Finance Committee that all measures have been taken to protect borrowers' rights in the bill.
Regarding the right of individuals to buy loans, he said that under the directive they can buy credit, but they do not have the ability to manage them and this must be passed on to credit servicers who are now governed by a very strict framework and licensed by the CBC.
He supported the bills and AKEL's amendment on the possibility of not granting a permit for reasons of national interest, despite as he said some problems that may arise from it.
ELAM MP Sotiris Ioannou said that they will vote against the bills, since they were not given satisfactory answers, while not enough was done to reduce NPLs in the credit system and instead irrational practices were applied.
He also said that they disagree with any attempt to sell performing loans, and said that no safety net is provided to consistent borrowers, expressing doubt whether the facilities will be given to good payers when needed. He was in favour of the amendment banning such sales.
According to Mr. Ioannou, the entire management of the non-performing loans "demonstrates the scandalous inadequacy of the system."
EDEK MP Ilias Myrianthous expressed support for the bills since, as he said, they seek to increase the obligations of banks and credit acquiring companies, aiming at transparency and protection of personal data. However, he said it does not include previously transferred loans, even if restructurings have taken place, which is a concern. It was also in favour of the amendments.
He noted that the general legislative framework for NPL management so far has not solved the management problems and there are practices for foreclosures up to primary residences. He called on this House to put pressure on financial institutions to protect citizens.
MP Alekos Tryfonidis said that the framework ensures as much as possible the protection of borrowers' rights, their rights are not affected by the transfer of their contracts, there are provisions for informing borrowers, obligations are established for the licensing of credit servicers and purchasers supervised by the CBC. The servicer, he added, is obliged to comply and NPL management is being improved.
He added that allowing individuals to operate is a harmonising obligation. It was also in favour of the amendments.
Green Movement MP Stavros Papadouris said that from the packing and sale of loans so far, banks' NPLs have fallen and gone to companies whose final beneficiaries are unknown since there is no shareholder with more than 10% and most of them depend on American funds.
He also noted a case of a company that does not cooperate, according to the Minister of Finance's own admission and for which the CBC only sends recommendations and has not imposed the slightest sanction. He criticized the passage of many laws in favour of creditors to buy back property, while the borrower gets hollow promises and laws that are not implemented. Regarding the amendment on the sale of performing loans, he noted that in case the borrower wants an extension of the loan, this may not be possible for the natural person who bought it to do so.
Individual socialist MP Costas Efstathiou argued against it, noting that trustees buy the loans at 20% of their value and demand that they be sold at 100%. He added that without transactional ethics, good faith, conditions and restrictions, such bills cannot be passed. However, he supported the amendments and stressed the unaccountability of bank capital in Cyprus.
Independent MP Alexandra Attalidou said that a state that has never been able to separate strategic defaulters from those who really cannot repay their loan shows that such an issue is being mismanaged. He noted that what was necessary for a proper legislative framework and for the benefit of citizens who pay their loans was not done. He also called selling performing loans unacceptable and said he would abstain from voting.
CNA
