CBC releases steps creditors must follow for borrowers
The Central Bank of Cyprus released the Code of Conduct that crediting institutions are meant to follow for borrowers with difficulties.
The code of conduct details the steps that crediting institutions are meant to follow for borrowers that have delays in their loans. It asks for the institutions to deal with clients that are having problems in the same manner that they handle all their borrowers, and help him/her find a way to pay their debts.
The borrower, on his/her part, will have to co-operate with the creditor during the whole process of restructuring (for example, provide all the necessary financial information), so that the institution can evaluate the financial status of the individual or company to come to a final restructuring of loans.
The Code has six stages that must be followed during the process of restructuring.
Stage 1: How your credit institution must communicate with you and how you must act
If any of your loans go into arrears, your credit institution must telephone you within the first 20 days from the date that your loan has been in arrears. The telephone communication must be of advisory nature so that the credit institution understand your situation and assist you if you consider it necessary.
Stage 2: Provision of information
Credit institutions have the right and obligation to request from you and from any of your guarantors (if and only if the credit institution relies upon them for the repayment of your loan) adequate, complete and accurate information regarding your financial situation and, if applicable, your guarantors’ financial situation, which are necessary in order for them to assess your financial situation.
Stage 3: Assessment of your financial circumstances
Your credit institution must, in accordance with the Code, assess the information submitted by you and your guarantors, if any, within one month if you are an individual and within two months in case of companies (extendable by up to 14 days).
Your credit institution must also exert every reasonable effort to collaborate with you throughout the assessment process in order to accurately determine your or your company's repayment capacity and thereby arrive at a fair and sustainable restructuring plan that is mutually acceptable.
Stage 4: Evaluation of a range of restructuring options
Upon assessment of your or your company’s financial information, your credit institution must explore all possible restructuring options that may be suitable for your or your company's situation.
During the evaluation of the different options vis-a-vis your financial position, your credit institution may, if consider it necessary, to contact you in order to obtain further information deemed relevant.
Among the restructuring options that your credit institution may consider offering include:
- permanent reduction of your loan instalment with extension of the repayment period of your loan;
- adding your instalments in arrears to your loan to be collected over the remaining term of your loan;
- an interest-only arrangement for a short period of time;
- splitting your loan into an affordable loan and a remaining balance is set aside to a later date;
- conversion of your foreign-currency denominated loan into a euro-denominated loan;
- consolidation of your loans into one new loan; and
- combination of two or more of the above restructuring options.
Stage 5: Proposal of a restructuring plan
Following the evaluation of restructuring options, your credit institution shall endeavour to determine at least one sustainable restructuring plan suitable for your case. This means a restructuring plan that will allow you to repay your loan so that a reduction in your loan balance in the medium term or long term is achieved. On the other hand, your credit institution may not manage to determine a sustainable restructuring plan for your case.
Your credit institution must complete your or your company's assessment and orally communicate with you its proposed restructuring plan or that no restructuring plan exists within one month if you are an individual or within two months for companies from the date of receipt of all necessary information. Subsequent to this, your credit institution must hand you or send you within 14 days from the date of your last contact, either: a “letter of offer”, or a “letter of negative decision”
Stage 6: Appeals process
In case you either reject the restructuring plan proposed by your credit institution or your credit institution did not determine a sustainable restructuring plan for your case, you have the right to submit an appeal to the Appeals Committee of your credit institution. Should you need to submit an appeal, request from your credit institution to provide you with an appeals form to complete or download it from the website of the credit institution.
The Appeals Committee must, within two months, review your appeal and –
- ensure that the provisions of the Code have been adhered to
if you rejected your credit institution's proposed restructuring plan, to investigate whether the proposed plan was appropriate for your case;or
- if your credit institution did not propose any restructuring plan to you, to conduct reassessment of your case and ensure that indeed no restructuring plan exists appropriate for your case.