Discussion over co-op arbitrators continues

Parliament on Tuesday continued discussion of a bill that would prevent cooperative banks from appointing their own arbitrators in loan restructuring dispute resolutions.

The legislative proposal was tabled jointly by the Citizens Alliance and the Greens.

However it was decided that bringing the bill to a plenary vote should be delayed by two more weeks after the Financial Ombudsman asked for data to better assess the situation.

Borrowers complain they are being misled by arbitrators appointed by the co-ops.

Costas Melas, head of the Borrowers Association, said arbitrators often deceive debtors by telling them that the matter at hand concerns the restructuring of their loans, thereby foisting on them interest charges anywhere from 7 per cent to 15 per cent.

Since 2013 there have been hundreds of thousands of such cases, many of which were annulled by courts, Melas told MPs.

The majority of borrowers were poor people with little financial savvy and so believed whatever the arbitrators told them, he added.

Committee chair Angelos Votsis (Diko) said it was their intention to end this practice by the cooperatives.

But it could get tricky, as lawmakers will need to ensure that any changes to the law apply to all banks on the island.

If this is not possible, said Votsis, then tweaks would have to be made to the arbitration procedures in order to at least correct any faults.

At any rate, the new procedures to be instituted would not be retroactive, as that could cause financial problems to cooperative banks.

The new arbitration procedures would apply to cases where court proceedings have not been initiated.