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Cyprus’ Consumer Protection Service (CPS) has imposed a €160,000 administrative fine on Alpha Bank Cyprus Ltd after determining that certain clauses in its mortgage loan agreements with consumers were unfair and insufficiently transparent.
The penalty follows an investigation conducted under the Consumer Protection Law of 2021, through which the CPS reviewed the terms used by banks in mortgage contracts offered to consumers in Cyprus. The authority noted that such agreements typically involve large loan amounts and long repayment periods, and are often secured against homes used as borrowers’ primary residences, making transparency especially important.
Investigation into mortgage loan contracts
The inquiry began in July 2024, when the CPS asked Alpha Bank Cyprus to provide a sample of its mortgage loan agreement, along with annexes, pre-contractual information documents and any other relevant materials. The bank submitted draft versions of its loan agreement governed by the law regulating credit agreements for residential property, as well as supporting documents and sample correspondence with customers.
After reviewing the material, the CPS concluded that some of the contract terms could create a significant imbalance between the rights of the bank and those of borrowers. According to the authority, several provisions lacked sufficient clarity and did not adequately inform consumers about how certain aspects of their loan agreements would operate.
Concerns over loan disbursement clause
Particular attention was given to Clause 1.2, which deals with the purpose, amount and disbursement of the loan. Regulators found that the clause failed to clearly explain how loan payments would be released, what criteria would determine the payment method, or to whom the funds would be transferred.
The CPS also said the provision allowed the bank to decide unilaterally how the loan would be disbursed, without clearly defined criteria, and did not adequately specify the conditions under which funds would be released.
Alpha Bank responded that the method of disbursement varies depending on several factors, such as the purpose of the loan and the conditions set out in the property purchase agreement. The bank also stated that in practice the details are typically agreed in advance between the bank and the borrower.
However, the CPS stressed that informal practices cannot replace clear contractual language, noting that consumers cannot be expected to know internal procedures that the bank may change at its own discretion.
Orders to amend contracts
Based on these findings, the authority ruled that the disputed terms breach Articles 50 and 52 of the Consumer Protection Law and therefore constitute abusive clauses.
The CPS ordered the bank to stop using the problematic terms within 60 days and to avoid referencing them in the future, including in relation to existing loan agreements. If the clauses continue to be used after the deadline, the bank could face additional penalties of €1,000 per day.
Bank cooperation and next steps
In its decision, the CPS noted that Alpha Bank cooperated during the investigation, providing documents and information requested by the authority. This cooperation was taken into account as a mitigating factor when determining the size of the fine.
The bank has also committed to revising the contested clauses and to contacting affected borrowers with letters confirming the relevant waivers, in order to ensure compliance with the law and strengthen consumer protection.
