The package of bills concerning the purchase and sale of credit facilities and the legislative framework governing these companies was among other issues discussed on Monday by the Parliamentary Finance and Budget Committee.
As the chairwoman of the committee, Christiana Erotokritou, said after the end of the session, the aim of the committee is to create a proper, objective, fair and transparent framework of protection for both borrowers and guarantors, while expressing satisfaction that the Committee's work has now made it clear that the access of credit purchasing and credit management companies to information on borrowers, as well as on guarantors, related parties and collateral providers, is not being widened.
Ms. Erotokritou also referred to DIKO's demand to the Government for the establishment of a special court for the quick resolution of financial and banking disputes, so that anyone who has a dispute with a financial institution can receive a quick response from the Cypriot judiciary on issues relating to their loan agreement, at whatever stage it is, whether it is with the financial institution or a credit acquisition company.
Asked about the paradoxical phenomenon of "companies with a capital of 150 thousand euros. and whether this will be resolved by the Commission, the DIKO councillor replied that credit purchase companies do indeed have much lower capital than the total value of the assets they manage, unlike financial institutions, which have specific requirements, stemming from European legislation and the capital needs they must meet.
"But here, we must be honest and say this: credit purchase companies do not manage the assets they manage. This is why there are minimum capital ratios to protect deposits," he said, adding that what is important, regardless of capital ratios, is that there is fairness and transparency in the management of assets, whether they are at the stage of a credit institution, whether they are being managed by a credit purchase company or a loan management company.
Asked whether they will be able to pay the appropriate fees, if such companies are convicted, in court, he said. "This is the last prerequisite to clear the way for the Recovery and Resilience Fund, any delay for us is criminal irresponsibility, we definitely want it to pass next Thursday," he said.
AKEL MP Andreas Kavkalias said in turn that the operating framework of credit purchase companies and loan management companies is defined by a relevant directive of November 2021 and that this directive should also guide the bills tabled by the government.
"The Government, however, by its own admission, admits that it has submitted the bills in question preferring its own positions in relation to loan management companies instead of those set out in the Directive because, according to the Government, if the Directive and the regulations it contains were adopted, this would create disruptions in the proper functioning of the market. In other words, the Government is asking us to ask for bills which it has tabled to cover agreements already concluded between credit purchasing companies and credit institutions and loan management companies, even though this deviates from the European directive."
As regards the substance of the bills, Mr. Kafkalias said that since last week AKEL has submitted a series of comments and suggestions concerning the strengthening of borrowers' rights, in particular that there should be compliance with the directive that speaks about unfair clauses, and has raised issues about strengthening the framework for effective and transparent procedures for handling complaints, as well as measures to be taken to deal with them. "Considering that in our assessment the capital adequacy of credit acquisition companies set by law is too low, strengthen this framework as well. The debate will continue on Monday and we await answers to see how to proceed in relation to the plenary," he concluded.
EPP MP Elias Mirianthous said that important issues should be regulated so that the borrower has a voice and a role in any case where a substantial dispute arises with the credit institution or credit purchase companies.
"We believe that the basis on which the appraisal is made, which determines the objective value of the property, should be clarified, while the amount of the loan cannot be charged to only one guarantor in case the primary debtor is unable to respond, but should be distributed equally to all guarantors and not for the bank to choose with whom to proceed to collect the amount due. Also, the attachment on assets of the primary debtor or the guarantors should be placed on an equal value to the amount due and not on the entire value of the mortgaged or some other properties," he added in this regard, adding that "banks are blackmailing banks for much lower amounts to go ahead and pledge properties of more than multiple values, with the result that many times owners, borrowers or guarantors are trapped and cannot find other avenues to settle their loan obligations".
Mr. Mirianthous also urged the Government to proceed with the establishment of a special court to adjudicate disputes between banks and borrowers, and stressed that the decisions of the Financial Ombudsman should be binding on all parties, as is the case in other European countries.
"Beyond that, we consider it a scandal that credit buyout companies without the necessary capital are proceeding to buy out properties worth hundreds of millions with sub-millions in equity. At last the government should answer whether it knows who is behind these investment funds or credit buyout companies and whether there are politically exposed persons hiding who are actually serving or backing the financial institution," he concluded.
DPA's bailiff Alekos Tryfonidis said that through this bill, both guarantors and their connected persons as well as collateral providers would be protected, adding that the risks of misuse of data from both the Land Registry and the Artemis System, have been minimized
He also added that the responsible Minister of Interior should answer "why the assets of borrowers for tax purposes or otherwise that they are at A amount, but at the same time when they are sold by the management companies they are at 1/4 and 1/5 of the amount. For this very serious issue, which is crucial, we are asking for answers because this is where the selling off of the properties of either the borrowers or, the guarantors starts. We also want, through the bill, to encourage viable restructurings and go after strategic defaulters who operate at the expense of the right borrowers, but also to provide incentives with interest rates for the right borrowers."
Finally, the MP of the Movement of Ecologists Stavros Papadouris expressed his satisfaction with the emerging agreement with the Ministry of Finance, explaining that "everything that was in the amendment submitted jointly by the Movement of Ecologists, DIPA and ELAM seems to be fully satisfied, while it has gone a stage further, giving the possibility of imposing a penalty in case of abuse of personal data, that is, access to Artemis and land registry data, that is, the property of any guarantor, related person to the borrower and the collateral provider. In addition to the penalty, the Treasury's addition that with express consent the loan management company can get the data of the related person and the collateral provider has been removed, which is unjustified and unreasonable."
Asked about what kind of risks may arise from possible bankruptcy of credit acquisition companies, Mr. Papadouris replied that the 2018 legislation allows auctions to proceed even if at the end of the day it is proven in court that the borrower was right in the claim, either a claim relating to abusive clauses or a claim relating to over-indebtedness, the answer given by the 2018 legislation is that as the banks and these companies are solvent institutions, one can on the one hand lose one's property today, and on the other hand in the eight years after the case is adjudicated one can seek compensation from these companies. "The question that will be asked when the cases are won in the courts in favour of the borrowers, when the question of compensation will be raised when there is no money there is no compensation, there are just papers which one can frame on the wall of one's house," he said.
Source: CNA
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