A prohibitive decree ordering the immediate cessation and non-repetition of the use of standard terms in loan agreements, which are recognized as unfair terms, was issued by the Nicosia District Court, on 13 May 2025, in a case concerning the Housing Financing Agency (OCS), but affects all banking institutions.
The decision is considered by the Legal Service to be extremely important, as it affects a wide range of borrowers and interprets essential legal issues for the implementation of the relevant legislation.
The decision was issued following a request by the Attorney General of the Republic, on behalf of the Director of the Consumer Protection Service, on the basis of violations of the Unfair Terms in Consumer Contracts Law (L.93(I)/96) and the EU Directive 93/13/EEC.
This decision of the District Court orders the immediate cessation and non-repetition of the use of standard terms in loan agreements that provide, inter alia:
- The right to debit the loan with bank fees, costs and charges, at the bank's absolute discretion;
- the bank's right, in the event that the interest rate is reduced or subsidized, to discontinue, at any time, the subsidy or reduction of the interest rate, at its absolute discretion;
- the bank's right to change, at any time, of the interest rate, of the bank rights; the costs, charges, default interest, frequency of interest and repayment instalment of the loan, at its discretion;
- the right of the bank to amend the repayment time and the amount of the instalments and/or generally to unilaterally amend all or any of the terms referred to in the repayment of the loan; the right of the Bank, in the event of non-payment of any instalment or in the event that the loan becomes payable and due, to increase at its discretion the interest rate on the entire balance of the loan or to charge additional default interest on the overdue amount; - the right of the Bank, in the event of non-payment of any of the instalments of the loan on the specified dates, to require the payment of the debt in court and/or otherwise; additional legal, legal and other costs of any nature, which are not specified and which are charged to the loan until final repayment, bear the same interest and are secured as the amount of the loan; - the right of the Bank, throughout its dealings with the borrower, to have the amount of the loan secured or guaranteed; the General Preferential Lien on all and any amount of money, on any negotiable document or security, and on any kind of assets belonging to the borrower which may at any time come into the possession, custody or control of the bank; - to join or consolidate all or any of the borrower's accounts with his obligations to the Bank, and to set off or transfer any amount or amounts which may be credited to him to any amount in an account or accounts to be repaid of part or all of the consumer's liabilities of any kind, pursuant to any account or for any other reason; whether these obligations have become chargeable, or may become chargeable, whether they are direct or indirect, personal or joint or joint or joint with another person or persons.
As noted by the Legal Service in a statement, the Court, referring to the case law of the Court of Justice of the European Union, pointed out that the collective procedure brought by the State aims to protect all consumers who conclude contracts with the OCS or other professionals who apply similar practices. The decision makes it clear that the use of similar clauses by other financial institutions in Cyprus may be the subject of future legal action.
This is the second court decision in Cyprus issued against a financial institution that orders the cessation of the use of unfair terms in consumer contracts, strengthening the consumer protection framework.
The case was handled by the Lawyer of the First Republic, Froso Sotiriou, on behalf of the Attorney General.
