Mediation Procedure
1.1. The Financial Ombudsman (the “Ombudsman”) may, upon an application submitted by a Debtor, appoint a mediator between the Bank and the Debtor for the purposes of restructuring credit facilities.
1.2 The Debtor has the right to submit an application in the following cases:
- For a credit facility which presents delays or arrears, the application is submitted within fourteen (14) days from the date which the Debtor has submitted PFS to the Bank, as defined from to time by the Arrears Management Directive of Central Bank of Cyprus.
- In case the application is not submitted within the aforementioned period, it must be submitted within thirty (30) business days from the date which the Bank submitted, in writing, the first restructuring proposal for credit facility to the Debtor or the date which the Bank sent a negative decision letter.
- In case which the Bank does not submit restructuring proposal or does not send a negative decision letter within six (6) months from the date of submission of PFS by the Debtor, the Debtor may submit the application within thirty (30) working days from the expiry of the six-month period.
In the case of credit facility that was terminated as at 19/12/2023, the application must be submitted until 19/6/2024. After this date, the right to apply shall cease to apply in such cases.
It is provided additionally to the above that the Debtor must have previously submitted to the Bank PFS.
1.3. The Debtor, with the application, pays a fee of €20 to the Commissioner, in one of his bank accounts.
1.4. The Debtor’s application must include the following information:
(a) the date of first contact between the Debtor and the Bank,
(b) the stage reached in the restructuring process,
(c) the reasons why he/she deems the appointment of mediator necessary,
(d) data and information relating to the credit facility, the delays / arrears, the Bank’s restructuring proposal (if submitted) or the Bank’s letter of termination of the credit facility (if submitted), and any other information necessary for the mediation process.
It is further provided that, if the Bank does not submit a restructuring proposal for the credit facility or does not sent negative decision letter within six (6) months from the date of submission of the Debtor’s personal financial statements mentioned in paragraph (a), the Debtor may submit the application within a period of thirty (30) business days from the expiry of the aforementioned six-month period.
1.5 The Commissioner appoints a mediator within 3 business days and immediately notifies the Bank and the Debtor in writing.
Provided that, the time of the mediation process is calculated from the first meeting, in which the mediator collects his fee.
It is further provided that, the mediator shall sign a declaration of confidentiality forwarded to him by the Commissioner and submit it, together with the receipts.
1.6 The Bank must arrange a meeting with the Debtor in the presence of the mediator within five (5) working days of being so informed by the Commissioner.
1.7 The cost to use the mediator service must not exceed the amount of €500 and it is allocated 20% to the Debtor and 80% to the Bank.
Based on the interpretative circular with no. 2/2024, the Commissioner has set the costs for the use of mediator services as follows:
(a) For restructuring credit facilities up to €100.000, the Debtor must pay €80 and the Bank €320 to the mediator.
(b) For restructuring credit facilities over €100.000, the Debtor must pay €100 and the Bank €400 to the mediator.
1.8 The Debtor may, at any time, submit an application to the Commissioner to discontinue the mediation process, in which case he shall be fully responsible of the costs of using the services of the mediator.
2.1 The mediator, after the end of the procedure, submits to the Commissioner a report on the mediation carried out, which includes, among others, whether or not an agreement has been reached.
2.2 The process of appointing a mediator, of the mediation and of the submission of a proposal by the Bank to the Debtor, as this arises after the completion of the mediation process, may not exceed a total of one (1) month. The relevant time can be extended by the Commissioner for 1 more month if there is a serious reason.
2.3 The Debtor reserves the right, within five (5) working days from the date of submission of the Bank’s proposal, as this derives after the conclusion of the mediation procedure, to apply to the Appeals Committee which is appointed by the Bank in accordance with the Directive.
2.4 The Bank may not initiate legal proceedings or proceedings to sell a mortgaged property or proceedings to obtain possession/sale of a property which is subject to finance lease against a Debtor for failure to fulfill its obligations under a credit facility before the mediation procedure has been completed, unless the Debtor has failed to exercise any of its rights within the specified period.
3.1 The mediation procedure applies only in cases of restructuring of Debtors’ credit facilities where:
(a) “debtor” means:-
- a natural person who is not bankrupt, or
- a legal person legally registered which is not under liquidation, whose annual turnover in the year preceding the year in which the complaint is made to the Commissioner does not exceed the amount of €350.000 (but does not include a financial undertaking), or a charity, union, association of persons, trust or provident fund (but does not include a financial undertaking) whose annual income or net assets (as the case may be) in the year preceding the year in which the complaint is made to the Commissioner does not exceed €250.000.
(b) “credit facility” means -
(i) a loan or overdraft limit or credit card limit for a total contractual obligation up to the amount of three hundred fifty thousand euro (€350.000), initially granted by a credit institution to a debtor and/or amended and/or replaced and which is secured by a mortgage or an assignment of security agreement filed with the Department of Lands and Surveys on property used as main property or as business premises, the estimated value of which does not exceed three hundred fifty thousand euro (€350.000) and seven hundred thousand fifth thousand euro (€750.000), respectively;
(ii) financial lease of property, used as main residence or as business premises, the estimated value of which does not exceed three hundred and fifty thousand euro (€350.000) and seven hundred thousand fifth thousand euro (€750.000), respectively, for a total contractual obligation up to the amount of three hundred fifty thousand euro (€350.000):
It is provided that, the valuation of the value of the main residence or business premises is carried out by an appraiser who is member of the Cyprus Scientific and Technical Chamber·
(c) “terminated credit facility” means a credit facility that was terminated as at the date of entry into force of the 2023 (Amendment) Law for the Establishment of the Financial Ombudsman of the Republic of Cyprus·
(d) “main residence” means property used for the residence of its owner or under construction property which will be used for the residence of its owner or, in the case of leasing contract, of its tenant, the contracting party, for a period of at least 6 months in a year.
(e) “business premises” means property which is used as place to house and conduct business and/or the debtor’s commercial activities and which is necessary for the continuation of its operations.
(f) “restructuring” means any action by the Bank which brings about changes in the terms and/or conditions of the credit facility and is intended to address existing or anticipated difficulties in the debtor’s servicing of the credit facility in accordance with the existing repayment plan.
(g) “PFS” means the personal financial statements, which is contained in Part III of the Code, in Annex 2 of the Arrears Management Directive, of the Central Bank of Cyprus.
For more information, you may visit the Commissioner’s website:
THE FINANCIAL OMBUDSMAN OF THE REPUBLIC OF CYPRUS - Financial Commissioner (financialombudsman.gov.cy)
