The Consumer Protection Service has fined Bank of Cyprus 170,000 Euros for tricky and unfair mortgage practices and other infringements of consumer rights.
The state-owned bank was investigated by the agency on its own initiative, it said in a statement. It was ordered to cease and desist the practices.
The problems included:
- Using evasive or unclear contracts allowing the bank to unilaterally change the interest rate and charges borne by the consumer.
- Imposing charges and other costs without presenting the consumer with accurate and easily understandable analysis.
- The contract conditions were unclear and incomplete, especially about the total repayment amount of the loan.
- The loan was connected with an insurance contract and dependent on paying premiums. This is a common practice with insurance companies owned by the banks. The consumer is pressured into signing an insurance contract or they don’t get the loan.
It’s rare for a consumer to enter into a clear cut mortgage agreement without hidden costs. The problems doubled after the financial crisis that was caused by the banks lack of risk management and the state’s over-spending. The banks moved to restructure their non-performing loans, but even this has proven to be problematic, with reports of some loans going back to their original amounts, even with many payments made over the years. Charges like late payment charges and running interest fees serve to bring the capital up until it feels like the money is going into a black hole. The interest rates were reduced by necessity, but in fact consumers are paying double the rates because the capital is increased to almost the original amount.
Reporting these kinds of consumer rights abuses is important. If you feel you have been unfairly taken advantage of by a bank, contact the Consumer Protection Service here: Consumer Protection Service
It can be argued that for all the symptoms, the damage to our economy was caused by greed. Greedy businesses do not survive long, because their practices eventually lose them their customers. Just ask Laiki Bank.
It is apparently a lesson that the banks have yet to learn.