The Contracts of Consumer Credit Law of 2010 (L.106(I)/2010) (“Cyprus Law on Consumer Credit”) which transposes Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (“Consumer Credit Directive”) has entered in force on 19/11/2010.
Cyprus Law on Consumer Credit aims to protect consumers who enter into “credit agreements” with “creditors”. A Creditor is a natural or legal person who grants or promises to grant credit in the course of his trade, business or profession. A Credit Agreement is defined as an agreement whereby a creditor grants or promises to grant to a consumer credit in the form of a deferred payment, loan or other similar financial accommodation, except for agreements for the provision on a continuing basis of services or for the supply of goods of the same kind, where the consumer pays for such services or goods for the duration of their provision by means of instalments. The definition of Creditor, therefore includes a service provider or the seller of goods provided that he/she provides credit of some sort to the consumer.
Cyprus Law on Consumer Credit applies to every credit agreement between a consumer and a creditor. It is therefore of no significance if the contract is a distance contract or a contract which has been signed outside business premises. However, the Cyprus Law on Consumer Credit does not apply to credit agreements which are less than €200 or over €75,000. Also, it does not apply, to credit agreements secured by a mortgage or similar security, to credit agreements the purpose of which is to acquire or retain property rights in land or in existing or projected buildings, hiring or leasing agreements with no obligation to purchase, overdraft facilities where the credit has to be repaid within a month, credit agreement which relate to the deferred payment of an existing debt, credit agreements which are the outcome of a settlement reached in court as well as some other exception.
The Cyprus Law on Consumer Credit lays specific obligations on the Creditor to inform the Consumer prior to the contract. Such pre-contractual information includes information in advertisements as well as information relating to the contract to be signed (such as the Annual Percentage Rate of Interest (“APR”)). The burden of proof that the information has been given lies with the creditor. Furthermore, the creditor has an obligation to assess the creditworthiness of the consumer. In case the creditor rejects the application of the consumer for credit, then the creditor must inform the consumer of the reasons for the rejection.