With the amendment of the Law relating to the Establishment and Operation of a Single Agency for the Out-of-Court Settlement of Financial Disputes, the powers of the Financial Ombudsman for the out-of-court settlement of disputes are extended.
In particular, debtors (natural or legal persons who are not in bankruptcy or liquidation) have the option to submit a request to the Financial Commissioner, who will then appoint a mediator to restructure the financial facility obtained from a financial institution, provided that the following criteria are met:
- The debtor must meet the requirements of Article 44 I E of the Transfer and Mortgage Law to be considered an 'eligible debtor’.
- The amount owed must be derived from a financial facility of an original contractual obligation, up to €350,000, which must be secured by a principal residence with an estimated value of up to €350,000 or a commercial property with an estimated value of up to €750,000.
- The loan must have been terminated on the date of publication of the law and for 6 months.
It is important to note that, the Financial Commissioner is not authorised to investigate the case, if the application submitted by a debtor, pertains to a credit facility for which a judgement has already been made by the Court. This is because the amount owed has already been established by the court judgment. Additionally, the Commissioner will not entertain applications if any judicial or auction proceedings for the sale or possession of immovable property under relevant legislation are in progress or have already been instituted.
By way of exception, an application may be made even if the parties are in ongoing legal proceedings, provided that the debtor and the licensed institution or the credit-acquiring company agree to obtain a postponement of the process from the Court to apply to the Financial Commissioner for the appointment of a mediator to restructuring the financial facility. It is clarified that, if there are pending foreclosure proceedings, these are postponed at the same time as the court proceedings are postponed. However, the period of postponement may not exceed four months.
Moreover, it is important to note that the mediator's decisions regarding loan restructuring are not binding. This means that the bank or the credit-acquiring company has the power to reject the mediator's decision. On the other hand, if the bank or the credit-acquiring company agrees to the Financial Commissioner's decision, it becomes a legally binding judgment for the amount owed between the parties.
Lastly, recent statistics show that approximately 88% of the Financial Commissioner's decisions about the restructuring of the loan are not accepted by the bank or the credit-acquiring Company, as a result, the case is referred to the court for judgement.
By Michaela Antoniou
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