Information Note 2/2024 – The new legal framework governing the extended powers of the Financial Commissioner (Ombudsman)

Information Note 2/2024

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INTRODUCTION

1. Further to the previous Note, which explained the procedures for the purposes that interested parties should adhere to (natural and legal persons) for the application and examination of complaints by the Financial Ombudsman, with this Note we will proceed to explain the next two Instructions, which are relevant to the procedures for applying for the appointment of a mediator, with a view to restructuring credit facilities. These are, in particular, the following
Instructions:

(i) The 2024 Directive on the Appointment of a Mediator for the Intent of Restructuring of Credit Facilities

    • This includes two (2) forms.

(ii) The 2024 Directive on The Registration Procedure of Mediators in the Special Register of Mediators Maintained by the Financial Commissioner (Ombudsman).

(i) THE APPOINTMENT OF A MEDIATOR FOR REASSESSMENT PURPOSES OF CREDIT FACILITIES DIRECTIVE OF 2024

2. The above Directive applies to any natural person/debtor or legal entity person/debtor who is not in bankruptcy and who wishes to submit an application for the appointment of a mediator for the restructuring of credit facilities of an initial contractual obligation in force, up to a maximum of €350,000. It should be noted that, in the credit facility, the mortgage collateral must include a principal residence, with an appraised value of up to €350,000 or business premises with an appraised value of up to €750.000.

In more detail:

  • A natural person is defined as any natural person who is not under bankruptcy proceedings. In this case, the person concerned should fill in the Application Form for Natural Persons for the Appointment of a Mediator for Credit Facilities Restructuring. This form is available at www.financialombudsman.gov.cy (under ‘Forms’).
  • A legal person is defined as a legally registered person who is not under liquidation, with an annual turnover in the year preceding the year in which the complaint is submitted to the Commissioner, not exceeding three hundred and fifty thousand euros (€350,000). It also means a charitable foundation or association or association of persons, with an annual income, in the year preceding the year in which the complaint is submitted to the Commissioner, not exceeding two hundred and fifty thousand euros (€250,000) or a trust or provident fund, with net assets, as at 31 December of the year preceding the year in which the complaint is submitted to the Commissioner, not exceeding two hundred and fifty thousand euros (€250.000). In this case, the interested party should complete the Application Form of Legal Persons for the Appointment of la Mediator for Credit Facilities Restructuring. This form is available at www.financialombudsman.gov.cy (under ‘Forms’).
  • The corresponding application form is accompanied by proof of payment of the twenty (€20) and must be submitted by hand, by registered post, by fax or by e-mail. Please note that electronic submission via the website www.financialombudsman.gov.cy, will be implemented in the future and a notice will be issued to this effect.
  • The application will be registered and assigned a complaint number ONLY WHEN IT IS FULLY COMPLETED. Therefore, in the event of incomplete information being provided, a reasonable time is given to the debtor to complete and submit the required information.
  • The Commissioner shall not consider an examination of a petition submitted by a debtor; and, shall therefore proceed to terminate it if the application in question relates to a credit credit facility for which, at the time the application is submitted, a decision has already been issued a judgment has already been given by a Court of the Republic or judicial proceedings are pending; or proceedings for the sale of mortgaged property by auction or proceedings to obtain the the possession or sale of immovable property subject to a leasing contract, by on the basis of the relevant legislation.

The right for the debtor to apply for the appointment of a mediator, for restructuring of credit facilities

3. The debtor has the right to apply for the appointment of a mediator for credit facility restructuring in the following cases:

i. If his credit facility is in arrears or overdue, he may submit an application, within fourteen (14) days, from the date on which the applicant has submitted a Personal Financial Status Statement (PFSS) to the licensed institution or to the credit purchaser, as determined from time to time by the Arrears Management Directive of the Central Bank of Cyprus.

ii. In the event that the application was not submitted within the above time frame, it must be submitted within thirty (30) working days, from the date on which the licensed institution or the credit acquirer submitted, in writing, the first credit facility restructuring proposal to the applicant or on which a letter of negative decision was sent by the licensed institution or the credit acquirer .

iii. In the event that the licensed institution or the credit purchaser does not submit a restructuring proposal or does not send a negative decision letter, within six (6) months from the date of submission of the CPS by the debtor, the debtor may submit the application, within thirty (30) business days, from the expiration of the six-month period.

iv. In the case of a credit facility, which on 19/12/2023 was terminated, the application may be submitted until 19/6/2024 and the debtor must have previously submitted the CPS to the licensed institution or the credit purchaser. Exceptionally, in these cases, an application may be submitted even if court proceedings are pending, provided that the debtor and the licensed institution or credit purchaser, if they agree thereto, obtain the permission of the Court in order to appear before the Commissioner, with a view to appointing a mediator for restructuring. It is clarified that, if a divestiture procedure is pending, it is suspended. It is further clarified that the postponement period may not exceed 4 months, at most.

Appointment of a Mediator by the Commissioner and Mediation Procedure

4. The Commissioner shall appoint a mediator within three (3) working days from the date on which it is decided that the application is approved. Thereafter, he shall inform the licensed institution or the credit acquirer and the debtor of the appointment of the mediator. The structure of the mediation shall be regulated by the mediator, in accordance with the provisions of the Law on Certain Mediation Matters in Civil Disputes, as amended and/or replaced from time to time.

Completion of the mediation process

5. The mediation process is completed:

  • Upon reaching an agreement between the parties, the said agreement must be signed in person by both parties and the mediator and a copy of it must be submitted to the Commissioner, as well as to the parties involved. It is noted that, in the agreement, the terms and the date of reaching the agreement reached by the parties involved are recorded and the special mediation process control form is attached to it.
  • If the mediator decides that the process is becoming ineffective, he declares it to be terminated. Subsequently, the mediator draws up a report, in which he records the failure to reach a settlement agreement and which bears his signature. A copy of the said report is delivered by the mediator to both the Commissioner and the parties involved, and the special form for monitoring the mediation process is attached to it.
  • If the debtor decides to discontinue the mediation process, he undertakes to pay the full cost of the mediation. The mediator then draws up a report in which he records the discontinuation of the process and which bears his signature. A copy of the said report is delivered by the mediator to both the Commissioner and the parties involved, and the special form for monitoring the mediation process is attached to it.

Useful notes

  • The Commissioner, for the purposes of accepting the application for the appointment of a mediator for the purpose of restructuring credit facilities, will be satisfied that the criterion of the estimated value of the principal residence (up to €350,000) or the business premises (up to €750,000) is met, based on the procedures regulated by the “Interpretive Circular of the Financial Commissioner (Ombudsman) on the Method of Determining the Estimated Value of the Main Residence or Business Premises”. The said Interpretative Circular is posted on the website www.financialombudsman.gov.cy.
  • The procedure for the appointment of a mediator and for the submission of a proposal by the licensed institution or the credit purchaser to the debtor, cannot exceed a total period of one (1) month. It may, however, be extended for another one (1) month, in the event that the Commissioner deems that there is a serious reason, which is submitted in writing, documented, by the mediator.
  • In the event that despite the successful completion of the mediation process, within the legal timeframe, the licensed institution or the credit purchaser does not sign the agreement, then the mediation is considered successful and is completed as such, with the licensed institution or the credit being obliged to present the agreement with the signature.
  • The debtor may, within five (5) working days, from the date of submission to him of a proposal (as it results from the completion of the mediation process), address the Dispute Resolution Committee of the licensed institution or the credit acquirer.
  • It is understood that the mediator appointed must be registered in the Special Register of Mediators, pursuant to the 2024 Directive on the Manner of Registration of Mediators in the Special Register of Mediators maintained by the Financial Ombudsman, as explained in the relevant Directive, below.
  • The mediator’s remuneration and the method of payment are regulated by the “Interpretative Circular of the Financial Commissioner (Ombudsman) on how to calculate the cost of using the services of a mediator” and the “Financial Commissioner’s (Ombudsman’s) Interpretative Circular regarding the payment of the intermediary”. These Interpretive Circulars are posted on the website www.financialombudsman.gov.cy.
  • The type of the special mediation procedure control form is regulated by the “The Financial Commissioner’s (Ombudsman’s) Interpretive Circular on the determination of the format of the special mediation process control form”, which is also posted on the website www.financialombudsman.gov.cy.

(ii) THE 2024 DIRECTIVE ON THE METHOD OF REGISTRATION OF MEDIATORS IN THE SPECIAL REGISTER OF MEDIATORS KEPT BY THE FINANCIAL OMBUDSMAN

6. In this Note, I considered it appropriate to refer, briefly, to the above Directive, for the purposes of clarifying the method of registration of mediators for the restructuring of credit facilities, in the Special Register of Mediators kept by the Financial Ombudsman. I therefore note the relevant procedures that should be followed by interested parties:

i. Interested parties should be registered in the Register of Mediators of the Ministry of Justice and Public Order.

ii. They should have received training from the Central Bank of Cyprus on issues of restructuring credit facilities.

Registration in the Special Register of Mediators

  • The Commissioner may, by public announcement in the Press or by sending an electronic message to the electronic address registered in the register of the Ministry of Justice and Public Order, invite mediators to inform him of their interest in being included in the Special Register of Mediators maintained by his Office.
  • Those mediators interested in registering in the Special Register of Mediators maintained by the Commissioner shall send a written expression of interest to the Office of the Financial Commissioner for registration in the Special Register of Mediators.
  • Those mediators who have not received training from the Central Bank of Cyprus on matters of restructuring credit facilities shall be informed of the next date of holding a seminar for the purposes of training on matters of restructuring credit facilities. The seminars shall be conducted by the Central Bank of Cyprus.
  • Upon completion of the training by the Central Bank of Cyprus, each participating mediator, upon submitting the relevant attendance certificate to the Commissioner, is legally registered as a mediator in the Special Register of Mediators that it maintains.
  • The Special Register of Mediators is posted on the Agency’s website, www.financialombudsman.gov.cy.
  • Those mediators who are already registered in the Special Register of Mediators that the Commissioner maintains may, if they so wish, request their deletion from the said register, either by sending a written notification to the Commissioner or electronically, to the email mediations@financialombudsman.gov.cy.