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New case of possible co-op overcharging being investigated

The financial ombudsman said on Friday he was investigating another case relating to possible excess charges on a loan at Strovolos co-op, which has to return some €27,000 after it emerged that it had been overcharging a client.

“This problem has been located in a particular area and it doesn’t concern the entire banking system,” Pavlos Ioannou told a news conference.

It was not however, restricted to one branch but five or six, based on the complaints.

Ioannou’s office had found that the co-op had agreed to charge interest on a housing loan based on the European Central Bank’s base rate, plus a surcharge.

However, SPE Strovolou charged its client a higher rate, based on a different base rate.

Ioannou said that the incident proved systemic, meaning it applied to over 1,000 loan agreements by the lender.

The borrower who filed the original complaint will be reimbursed €27,000 in overcharges.

It had emerged that SPE Strovolou could be asked to pay back some €35m in excess charges though that figure was downplayed by the head of the co-operative central bank on Thursday.

Nicolas Hadjiyiannis said the matter emerged after the island joined the common currency in 2008.

Ioannou urged borrowers to check their loan agreements since the matter appeared to affect several branches.

“Complaints have been submitted for five or six such branches of the group in question,” he said. “We are talking about 75 to 80 such cases.”

Ioannou conceded that the co-op sector’s new leadership was faced with problems of the past; “problems bequeathed to them through the bad practices of the past which they are trying to correct.”

Apart from the €27,000 in one case, his office also calculated that a second case should also be reimbursed with €83,000.

But the borrower in the latter case decided to go to court to claim more.

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