Consumers to be protected from random bank charges

PARLIAMENT yesterday received a harmonising bill that aims to offer better protection to consumers who take out personal loans.
The Unfair Contract Terms Directive, which should have already been transposed into national law, introduces the notion of “good faith”, which hopes to bring better protection to consumers when drawing up bank loans.
This includes regulating additional charges imposed after a loan contract is signed, and enforcing strict advertising regulations to ensure misleading information is avoided.
The law, which must be put into effect as part of Cyprus’ EU obligations, covers loans of over €200 and under €5,000, as well as overdrafts and credit cards. There is little margin for alterations, and parts of the Directive’s provisions are binding.
According to House Legal Affairs Committee Chairman, DISY’s Ionas Nicolaou, the legislation is significant because it will cover a large gap in local legislation regarding consumers’ rights  when it comes to personal loans.
“The bill introduces essential regulations for procedures followed by creditors to cover loans,” said Nicolaou. He said these include the charges imposed on loan contracts, as well as advertisements for loans, and interest rates offered.
But he said there was one weak point in the bill, which MPs would try to find ways to amend.
“As the bill stands, we can’t put an end to charges and expenses imposed at times by banks after a contract has been signed, without these first being agreed with consumers,” said Nicolaou. “We often see charges imposed on accounts that hadn’t previously been agreed in the relevant contracts and it seems this bill won’t put an end to that.”
He explained that despite a tight margin for amendments, the Committee would try to find a way to predetermine these charges. “But unfortunately, the provisions are such that make it hard to ban banks from imposing charges, other than those agreed in the contract.”
Currently, loan contracts include a provision that allows the bank to impose an unspecified charge at any point after the contract has been signed, without previously consulting the consumer. Nicolaou said his Committee aimed to regulate this aspect of the matter if possible.
“If a bank signs a contract with a consumer, we want any new charges to be imposed only once the consumer has been consulted and he or she has consented to it,” he explained. “We basically want to put an end to unacceptable goings on in the banking sector. We want the law to control these phenomena.”
The Directive also hopes to install healthy competition between banks, as well as co-ops and other financial institutions. “The benefits that were expected for consumers haven’t been created,” said Nicolaou. “Roughly, the terms and conditions among banks are the same. This doesn’t offer the chance to choose a bank with the best terms and conditions.”
Nicolaou said it was a fact that parliament had a limited amount of time to discuss the bill, as the EU had already sent a warning letter. “But it is a very important bill, we will give it priority to wrap as soon as possible and make the best possible amendments.”