Zypern
Cyprus lawmakers have taken a decisive step towards tightening protection for borrowers, as Parliament’s Commerce Committee agreed on Tuesday to send two proposed laws to the full House for a vote aimed at shielding consumers from unfair clauses in mortgage contracts.
The move comes amid strong objections from key institutions, including representatives of the Legal Service, the Consumer Protection Service, the Cyprus Bar Association, and the Cyprus Banks Association, all of whom voiced concerns about the proposed regulations.
The parliamentary initiative follows a recent enforcement decision by the Consumer Protection Service, which imposed a €160,000 fine on Alpha Bank Cyprus after determining that certain clauses in its mortgage agreements with borrowers were abusive.
The penalty against Alpha Bank is the latest in a series of actions targeting lenders’ contractual practices in the Cypriot mortgage market.
Earlier rulings by the Consumer Protection Service included an €800,000 administrative fine against Bank of Cyprus and €600,000 against Eurobank – formerly Hellenic Bank. In both cases, the banks were ordered to amend problematic clauses affecting more than 22,000 mortgage agreements.
Separately, the Housing Finance Corporation was subject to a court injunction relating to similar contractual concerns.
These developments have intensified the debate over how Cyprus should regulate mortgage contracts and enforce consumer rights within the banking system.
Stavros Papadouris, president of the Ecologists Movement and sponsor of the first bill, told the committee that the issue has now become a matter of political decision.
According to Papadouris, the wide-ranging consumer protection legislation introduced in 2021 contains conflicting provisions regarding the termination of abusive clauses in contracts.
He pointed to EU Directive 93/13/EEC, which obliges member states to adopt measures preventing unfair terms in contracts between consumers and professionals.
Under the directive, abusive clauses do not bind the consumer, while the remainder of the contract remains valid provided it can continue without those terms.
Papadouris also referred to a court ruling involving SociétéGénérale Bank, where a contract containing 14 clauses was annulled entirely. He further criticised delays by the Legal Service in resolving cases dating back to 2016.
Questioning the timing of decisions in more recent cases involving banks, he suggested that enforcement priorities may ultimately reflect political choices.
Papadouris’ proposal seeks to amend the core legislation so that contracts concluded before the introduction of the new consumer protection framework are assessed under the current law.
The second proposal, submitted by DISY MP Kyriakos Hadjiyiannis, aims to strengthen consumer rights more broadly, recognising borrowers as the weaker party when entering agreements with credit institutions.
Elena Papachristoforou, representing the Consumer Protection Service at the Ministry of Commerce, argued that the two legal opinions issued by the Legal Service on the matter are not contradictory.
However, she stressed that the Consumer Protection Law includes provisions prohibiting retroactive application in relation to unfair contract terms — a factor that must be carefully considered.
She added that the draft legislation had been referred to the Legal Service because it raises complex legal questions. The service continues to examine mortgage agreements signed before the 2021 legislation under the previous legal framework.
Notably, the Legal Service has issued sharply differing interpretations.
In an opinion submitted to the Commerce Committee on 5 February 2025, government lawyer Froso Sotiriou concluded that retroactive application of the Consumer Protection Law to remove abusive clauses from earlier loan agreements would not be justified under the Constitution.
Yet a second opinion, requested by the Ministry of Commerce and submitted to Parliament on 12 February, recommended the deletion of Article 75 of the 2021 Consumer Protection Law.
The Cyprus Bar Association warned that the proposed changes could create constitutional complications.
Ira Emilianidou said the association’s main concern is that the legislation may conflict with Article 16 of the Constitution, which protects freedom of contract.
Similarly, Elena Frixou of the Cyprus Banks Association expressed serious reservations, arguing that the proposals raise significant constitutional issues.
She maintained that the current law already aligns with European directives, while also voicing concern over additional categories of abusive clauses introduced in the second bill.
Consumer organisations, however, broadly support the proposed legislation.
Jenny Papacharalambous, Director-General of the Cyprus Consumer Protection Association (SYPRODAT), said the group agrees with the proposed measures.
She also noted that court proceedings in the case involving Bank of Cyprus have concluded, with the judge currently reserving judgment.
Meanwhile, the case involving Hellenic Bank — now Eurobank following their merger — continues to face repeated delays.
DISY MP Averof Neophytou criticised what he described as an “àla carte” approach to retroactive legislation.
“When retroactive provisions benefit citizens, they are labelled unconstitutional,” he said, “yet when they serve the interests of the state, they suddenly pose no problem.”
