The Consumer Protection Service has censured Hellenic Bank for unfair contract terms, in the such second decision against a retail bank in as many months.
The CPS investigated two contracts, and discovered they had the following abusive terms:
- The bank had absolute discretion to change the interest rate and calculate it on a daily basis, and used a 360-day calculation to charge rates. Banks and the rest of the financial markets are only open during weekdays, meaning that there are only 260 working days per year. In any case, monetary policy changes do not happen every day. At the most, a central bank could change its key rates on a monthly basis, but in practice this is rare, and only in the case that there is a big shift in economic performance. Banks in the EU are obligated to show that their interest rate is connected in some way to the European Central Bank’s rates, which are currently negative.
- The bank took unilateral decisions to charge savings or current accounts to offset loan accounts. Funds were transferred to loan accounts from other accounts without the owner’s permission.
- Hidden charges were added to accounts and customers forced to pay extra charges for the early repayment of loans.
- The bank included clauses to the effect that they were allowed to demand repayment at any time along with the addition of further charges at will.
These discoveries resulted in an administrative decision against the bank. The bottom line result of the overcharging is that cash is drained from the economy and into the bank’s own accounts. This is an unhealthy situation because other businesses and households are forced into financial difficulties.
It is greed and consumer abuse, plain and simple, and ultimately works against the banks and the banking system in general because if all the money goes into an unproductive black hole then what is left for the economy to run on and for people to repay their debts? If you take into account that the banks are not performing well this point carries even more weight.
The growing number of decisions against consumer abuse should be a signal to the Cypriot banking system to change and modernise its approach to lending. Instead of high interest rates, excessive charges and forcing people into arrears, the banks could keep rates reasonable, reduce costs like expensive, hideously and needlessly large buildings, and stay open longer so they are of more service to the population.
If they keep going the same way as they are now, they face more censure, more disapproval, lower profits and worsening reputations.