Cyprus Mail
Cyprus

Co-op deducts €2 million in interest calculation error

Cooperative Central Bank CCB

The Cyprus Cooperative Bank (CCB) has made adjustments to some clients’ accounts, extracting funds from them in order to ‘correct’ an earlier accounting mistake.

The state-owned lender deducted amounts from some 150 accounts – an estimated €2m altogether – to correct a previous instance when it was discovered that the bank had overcharged customers.

The matter was brought to the attention of financial ombudsman Pavlos Ioannou, who was alerted to the issue by an MP about a month ago.

Two or three individuals went to the MP complaining that their accounts were debited with substantial amounts, without prior notice from the bank.

The individuals were referred to Ioannou, who began investigating.

“There are some very angry people out there,” he said.

In late 2017 or early 2018 the CCB admitted that it had made errors in interest rate calculation concerning customer loans for the period 2008-2013.

The errors had resulted in customers being charged with interest rates higher than the base rate. The error concerned approximately 11,000 accounts, to the aggregate amount of €125 million.

The bank said at the time it would be refunding the affected customers.

Now, the CCB claims to have made a second mistake, in that it over-calculated the amounts that were to be refunded to certain customers.

About a month ago, the bank proceeded to rectify their second error, by making refund adjustments and taking back some €2m from 150 customers’ accounts.

These are preliminary figures, according to communications held between Ioannou and the bank.

According to Ioannou, the refund adjustments are associated with loans that have not yet been repaid.

In one case brought to his attention, initially the bank reduced a customer’s outstanding loan from €40,000 to €25,000, after discovering the customer had been overcharged. It refunded the customer to the tune of €15,000.

Subsequently, the bank adjusted (reduced) the refund, taking back €10,000 of the €15,000.

Ioannou said these sort of mistakes were unacceptable, as the individual concerned would in the interim have made other plans, thinking that after the refund their outstanding €25,000 debt was manageable, only for the debt to be readjusted upwards again.

In another case, the CCB had ‘corrected’ a loan balance by reducing it by €14,000, only to come later and charge the account with the same amount.

Moreover, the recent refund adjustments were made without previously informing the customers.

“Such practices, where major changes are suddenly made to an account, shake people’s confidence in the banking system,” Ioannou told the Cyprus News Agency.

“Is this how they [the bank] keep their accounts? Lots of people will start wondering how accurate their bank statements are.

“This is the 21st century, and the CCB has computers, handsomely paid financial analysts…how can such mistakes occur?”

Speaking to the Cyprus Mail, Ioannou said that he will compile a report on the affair. The fact-finding report should be ready in the next few days. It is not binding on the bank.

It would up to dissatisfied customers to take any further action against the lender.

 

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