Poutziouris Law Firm | PLF

Banking & Finance - Latest Report 

Cyprus Banks are facing a wave of court action from different groups in the aftermath of the economic and banking crisis faced by the island in 2013. These groups include the depositors who had their savings wiped out by the unprecedented bail in, consumers who acquired foreign currency loans, and most recently borrowers whose accounts have been strategically and unethically overcharged.

Haircut on Deposits

The first group of complainants, the depositors in Laiki bank, took a 47% haircut on their deposits in an unprecedented bail in imposed on them by the Cyprus government and the Troika. The remainder of their deposits were transformed into bank of Cyprus shares following the merger of ‘good’ laiki with bank of Cyprus. Laiki depositors now have an 18% sharehold in the Bank of Cyprus which has, since the capital increase following a 1 billion euro investment into the bank, devalued their deposits further.

Swiss Franc Loans

Foreign currency loans or Foreign Exchange Loans are the latest banking practice which have been called into question by consumers in Cyprus. Many borrowers who have agreed to foreign currency loans, mostly in Swiss Francs, have been misled by the banks or misinformed as to the exchange rate clause meaning consumers are and have been paying significantly more to service their debt than they had initially believed. A preliminary ruling made by the European Court of Justice has addressed this issue and has laid down the correct interpretation of the Unfair Terms Consumer Contract Directive 93/13 which is now applicable in Cypriot courts.

Accordingly unfair foreign exchange clauses in agreements made in Cyprus can only be examined by the court if it forms part of the main subject matter of the contact. Whether the term actually forms part of the subject matter lies at the discretion of the court having regard to the whole contract. If the agreement includes a financial obligation on the consumer to pay the difference between the selling rate of exchange and the buying rate of exchange then the term may not be subject to an examination of unfairness.        

Directive 93/13 states that the loan contract terms must be in plain intelligible language and this includes that ‘the loan agreement must set out in a transparent fashion the reason for and the particulars of the mechanism for converting the foreign currency’.

The court must decide whether a consumer who is reasonably well informed and objectively observant on the basis of the promotional material  provided by the lender in the course of negotiating the contract would not only be aware of the existence of the difference between the selling rate of exchange  and the buying  rate of exchange of a foreign currency. Furthermore the consumer must be able to assess the consequence’s arising from the rate of exchange for the calculations of the repayments and for the total cost of the sum borrowed.  

Predatory Lending & Abusive Intrest Rates 

The final category of claimants are the general borrowers from Cypriot banks whose accounts have been strategically charged by the banks over a period of time unethically and without cause. This category of people may be entitled to sue the bank for damages and for breach of trust. 

If you have been affected by the banking crisis or fall into the above categories you may have a claim against your bank. For more information you can email us at This email address is being protected from spambots. You need JavaScript enabled to view it. or you can send us your bank statements and other documentation and  we will study them free of charge to see whether you have a viable claim against the bank.

 

Christos Poutziouris 

Executive Partner

Poutziouris law Firm | PLF

Link: Banking and Finacial disputes