Nicosia, Cyprus. Cyprus’ cabinet approved proposals to strengthen the role of the Financial Commissioner and introduce new safeguards for primary residences, aiming to steer more cases toward debt restructuring and away from foreclosure.
Legislation and timeline
Finance Minister Makis Keravnos said the package includes two bills due to be sent to the legal service on Tuesday morning for legal drafting. The measures seek to widen the commissioner’s role in debt disputes and give borrowers earlier access to the process.
Earlier access and upgraded debt confirmation mechanism
Keravnos said the first measure would upgrade the existing debt confirmation mechanism by adding the possibility of debt restructuring. This would allow a borrower to go to the Financial Commissioner earlier, by receiving the standard 1st priority letter mail for general correspondence (Type I) instead of the registered mail to ensure legal service, often as a second notice (Type IA) currently in place.
“This means that more time is created for the debtor to approach the financial ombudsman,” Keravnos said, adding that the commissioner would also have more time to examine the issue and try to find a settlement.
Referral to insolvency counsellor and repayment plans
Keravnos said that where the commissioner is asked to confirm the debt, but the two sides fail to agree on an initial restructuring or repayment route, the case could then be referred to an insolvency counsellor to prepare a personal repayment plan.
He said this is meant to address a weakness of the current system, where even in cases of broad agreement, debtors may be required to repay the amount due almost immediately. “This is not always possible,” he said, adding that a binding personal repayment plan would provide a solution.
Binding decisions in smaller disputes
The second measure introduces binding force for decisions of the Financial Commissioner in complaints against financial companies involving amounts of up to €20,000. Keravnos said the threshold was chosen because around 75% of cases where disputes arise and settlements are delayed involve sums between €10,000 and €20,000.
How do you think earlier access to the Financial Commissioner could affect debt restructuring outcomes?