"There is a completely abusive and illegal clause in the loan agreement"

The Financial Commissioner Pavlos Ioannou invites all those who signed as guarantors in loans granted by the Housing Financing Organization to carefully read the loan agreement

loan guarantors 1140x761 1 loans, illegality, Resident Support and Solidarity Initiative Sotiras, Financial Commissioner

In a multi-page information note, issued yesterday, the Financial Commissioner Pavlos Ioannou calls on all those who signed as guarantors of loans granted by the Housing Financing Organization to carefully read the loan agreement and if they find in it a specific clause. characterizes as completely abusive and illegal, to resort to the organization and request their exemption from the contract, if the organization applied it against them.

In addition, the Commissioner calls on the State to ask the FSB to remove the abusive clause from its loan agreements and to ask the agency to release all guarantors against whom this clause has been applied.

What is the abusive clause identified by the Commissioner, not in one, but in several loan agreements by the ESF? This clause, according to the note of Mr. Ioannou, is incorporated in the loan agreement itself, just below the signatures of the borrowers and under the title "Guarantee" and includes the following: "We guarantee solidarity and / or separately and / or in divorce with the debtors the repayment of any amount owed in accordance with the terms of this document until full repayment. Any delay or extension or suspension of payment of part or all of the debt does not release us from the responsibility of the guarantee even if the Organization did not inform us beforehand ".

That is, the OHS made the guarantors sign that they would be responsible for all the delays in the repayment of the loan by the first borrower, even if the OHS failed for years to inform them about these delays!

One could say that, after signing such a clause, the guarantors are "handcuffed". However, the Commissioner explains at length that the above clause in the FSM contract is abusive and illegal, therefore it does not bind the guarantors and should be deleted. As Mr. Ioannou explains, Article 12 (1) of the Law on the Protection of a Certain Category of Guarantors of 2003 is absolutely relevant, which defines the responsibility of each lender to inform the guarantor without delay, for any delays in the payment of installments. It contains, in more detail, the following: '12. (1) In any guarantee agreement, the creditor shall be obliged to inform the guarantor without delay and in writing by letter to his address recorded in the loan agreement or to the last known address to the creditor, for any delay in the payment of at least three installments or breach by the first borrower of any other promise or obligation under the loan agreement or the removal or modification of any encumbrances placed on his property for the benefit of the creditor for the purposes of the loan agreement '.

In addition, Article 12 (3) of the same law, the Commissioner states, is in conflict with the abusive provision in question in the FSM contract, as it clearly refers to the fact that the lender's failure to inform the guarantor about repayment delays is an omission. of the loan from the first borrowers.

According to the Commissioner, "undoubtedly, this illegal omission in informing the guarantor in a timely manner, makes him exempt from his guarantee obligation. In this regard, Article 12 (3) of the Law on the Protection of a Certain Class of Guarantors of 2003, provides as follows: of this article: (a) is considered an omission to perform an act imposed by the obligations of the creditor to the guarantor within the meaning of Article 12 of the Law on Contracts, and acquits the guarantor in the event that it is breached, as provided in that article; the final satisfaction of the guarantor himself by the first debtor; obligations, provided under the Law on Contracts in relation to violation of an essential condition of a contract by a contractor ".

They were 20 years late to send him the first warning!

For a specific complaint recently considered by the Commissioner and deemed perfectly justified and acceptable, the OHS informed - warned the guarantor for the first time - complaining of… 153 installments of the first debtor on 18/01/2021, after 20 years from granting the loan! Examining this complaint, the Commissioner considered that he was obliged to conclude that the OHS did not comply with the provisions of the relevant legislation and should have taken steps to inform the complainant of the delays and decided as follows:

- The complaint is fully substantiated and accepted.

- OXS due to its unconventional and illegal acts and / or omissions, must immediately release the complainant from his guarantee obligation, in relation to the loan agreement with number xxxxxxxxx.

- The OHSR must immediately correct and amend the guarantee agreements it uses with regard to its obligation to inform guarantors without delay, in a manner consistent with the provisions of Article 12 (1) on the Protection of a Class of Guarantors Law of 2003.

The decisions of the Commissioner are not binding on the bodies concerned.