What to be aware of before entering into credit agreements in Cyprus
Consumer Law: Borrower who is a consumer
The first issue which needs to be addressed is whether the borrower acts as a consumer at the time of entering into the loan agreement. Under our Consumer Laws on credit agreements, the general rule is that loans granted to natural persons who are acting outside the scope of their business or professional capacity are considered to be consumer loans. Where the loan is granted to a consumer and certain other conditions are met, the bank must provide specific information to the consumer – and if the bank fails, then the loan may be judged by the court as interest-free.
Time of entering into the loan agreement
The second issue which needs to be dealt with is the time of entering into the loan agreement. The timing of the conclusion of the agreement is important as it relates to the rights of the borrower vis-a-vis the creditor. For example, before January 2001, when the Liberalisation of Interest Rate and Related Matters Law of 1999 came in force, banks were not entitled to recover interest which exceeded the original loan amount. This provision may also be applicable to loan agreements concluded before January 2001 but which continue in existence today. It is noted that this provision applies to any loan agreements irrespective of whether the borrower is a consumer.
Purpose of the loan agreement
The third issue to be addressed is the purpose of the loan agreement and the amount of borrowing involved. Examples are consumer mortgage contracts for a loan amount of less than €200,000 or hire-purchase agreements where the loan does not exceed €35,000. In such cases, where the contract was concluded between 01/06/2002 and 09/05/2017, then the loan agreement is caught by Consumer Law provisions – more specifically the Consumer Credit (Housing Loans and Hire-Purchase Agreements) Law of 2001. Based on this Law, a bank which provides a loan falling within the above categories to a consumer, owes certain duties towards the consumer.