Cyprus Mail
Cyprus

Mediation services for unhappy borrowers

Financial ombudsman Pavlos Ioannou

By Angelos Anastasiou

THE FINANCIAL Ombudsman’s office will begin processing complaints by borrowers against financial institutions on Tuesday, board chairman Yiorgos Kyriacou announced on Monday.

However, Ombudsman Pavlos Ioannou was quick to point out that the law doesn’t allow him to examine cases relating to holders of bank securities.

“To facilitate that, the law’s retroactive parameters need to be broadened,” he said.

The issue of bondholders will be discussed at Wednesday’s board meeting.

Ioannou said that the office, which started receiving complaints last November, has thus far received 30 complaints, half of which are in progress.

“Of the 30 received, 15 are in progress, five were mediated successfully, three have been withdrawn, and one has been rejected, leaving six under consideration,” he said.

He added that the cases currently being looked at relate to a total €4 million of loans, while the five successfully mediated cases relate to the restructuring of €1.05 million in loans.

Ioannou said that the most commonly cited reason for the sluggish rate of applications received is that borrowers are awaiting reductions in interest rates before applying for a restructuring of their loan.

Another reason, he added, is that borrowers are opting to wait for the outcome of consultations regarding the insolvency framework – a set of laws governing insolvency and bankruptcy.

And yet a third factor is that some borrowers’ associations are urging their members to take the legal route, which “obviously impacts complaints adversely”.

“However, due to the fact that there is a substantial rate of successful mediations, we expect the number of complaints we receive to increase soon,” Ioannou said.

He estimated that the Ombudsman’s Office will be able to present statistically significant data by mid-year, when the number of mediations will approach or exceed 100.

Board chairman Kyriacou highlighted the importance of out-of-court mediation in financial disputes, saying it offers an alternative to many borrowers, including households and small businesses.

On the other hand, he added, it also benefits financial institutions inasmuch as it fosters a climate of trust by successfully mediating amicable arrangements.

The Financial Ombudsman briefly described the procedure for submitting and handling a complaint.

These may relate to claims up to €170,000, although the ombudsman may only award damages up to €50,000.

Complaints may be filed against financial institutions, including banks, investment firms, or insurance companies.

In order to file a complaint, a borrower must have taken the issue up directly with the financial institution within 15 months of the issue arising, with the institution afforded three months to respond.

Should it fail to do so, the customer may then file a complaint with the Financial Ombudsman within four months, but the ombudsman’s ruling will not be enforceable unless both parties state its acceptance in writing.

But although not legally binding to the parties, the ombudsman’s decision will carry weight in a court of law, Ioannou argued.

“The ruling will not be a general one, but will pertain to specific instances,” he said.

Asked to comment on whether the procedure appears extremely time-consuming, Ioannou explained that it is very similar to the procedure followed abroad.

And anyway, he added, a ruling will only be issued if efforts to reach an amicable arrangement have failed.

“Thus, many complaints could be settled through amicable arrangements,” he said.

“Further, international experience suggests that many complaints may be owed to misunderstanding, or can otherwise be settled easily.”

 

www.financialombudsman.gov.cy

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