The protection of borrowers hinges not only on legal compliance but also on the social responsibility of banks and credit acquisition companies (CACs), according to Costas Melas, president of the Cyprus Borrowers Association (Syprodat).

Speaking to the Cyprus News Agency (CNA), Melas said that while these companies adhere to the directives and code of conduct set by the Central Bank of Cyprus (CBC), their “practical implementation remains questionable”.

Melas said there is a need for a sustainable framework to “stabilise the economy and prevent further financial disruptions”.

He acknowledged that “borrowers today are in a much better position compared to two or three years ago”.

Moreover, he credited this improvement to a “shift in approach by banks and CACs, which now show a greater willingness to find sustainable restructuring solutions in line with the CBC’s code of conduct”.

“This shift”, he explained, “aims to minimise foreclosures wherever possible”.

He attributed this development to the “recognition by financial institutions that many borrowers struggle to meet their loan repayment obligations due to rising costs“.

It was also mentioned that since mid-2022, successive interest rate hikes by the European Central Bank (ECB) to curb inflation have made loan repayments increasingly burdensome.

Additionally, the rising cost of essential goods and services has eroded household purchasing power, further exacerbating financial strain.

“The increase in the cost of basic products and services is reducing the real income of households, while loan repayments are becoming increasingly difficult,” Melas explained.

He added that this situation “forces borrowers to prioritise their living expenses over debt repayments”.

Melas also highlighted a past trend where “economic policy took precedence over social needs”, with the priority placed on “ensuring the survival of banks rather than supporting households”.

However, as banks have stabilised, the focus has shifted towards economic cohesion and the well-being of families and businesses.

“Despite regulatory compliance, borrowers often feel inadequately supported by CACs,” Melas said.

He explained that “many find the solutions proposed by financial institutions restrictive, unaffordable, and ultimately unsustainable”.

“The protection of borrowers does not depend solely on legal compliance but also on the social sensitivity of CACs,” he added.

He also pointed out that the financial pressures faced by borrowers, coupled with a lack of substantial state support, have “highlighted the urgent need for a sustainable economic framework to prevent further financial instability”.

Discussing Syprodat’s efforts to assist borrowers, Melas stated that the organisation intensified its activities in 2024.

This included engaging with CACs and regulatory authorities to address issues such as loan interest rates, trapped property buyers, primary residence protection, foreclosures, and loan restructuring.

These discussions also tackled long-standing concerns related to debt restructuring, foreclosure suspensions, and excessive charges.

Melas also referenced a “particularly constructive meeting” with the governor of the CBC Christodoulous Patsalides.

He said that during the meeting, both sides agreed that “loan restructuring offers benefits for both CACs and borrowers, as it helps prevent the negative consequences of foreclosures”.

Regarding the issue of trapped property buyers, Melas revealed that over 9,000 borrowers remain affected.

The matter is currently under parliamentary discussion, with a government bill expected to provide a definitive resolution.

On the subject of unfair commercial practices and abusive clauses, Melas referenced a proposed law by MP Stavros Papadouris.

Additionally, he stressed that European Directive 93/13 remains the cornerstone of consumer protection and is mandatory for all member states.

“The directive is still in force and takes precedence over any national law,” Melas said.

“It mandates the removal of abusive clauses from contracts, allowing them to either continue without these clauses or be terminated if they cannot function without them,” he concluded.