Cyprus’s parliament voted on Thursday to revise a package of foreclosure and insolvency laws that President Nikos Christodoulides had referred back, accepting four of five referrals and rejecting one. The changes, agreed within 45 minutes at the Finance Committee, now return to the President for signature.
What was agreed
Four referrals were accepted — two in full after specific provisions were amended, and two partially, with the required modifications made. One referral was rejected.
Higher threshold for primary residence protection
Parliament accepted the Ecologists’ proposal amending the Personal Insolvency Law, raising the value of a primary residence covered under the insolvency framework from €350,000 to €400,000. The revision also removes distortions that were creating artificial barriers for insolvent individuals who would otherwise qualify for protection under the framework. The President is expected to sign this law.
Ban on additional collateral demands
Parliament also accepted ELAM’s proposal prohibiting creditors from demanding additional collateral from borrowers when the loan amount is already fully covered by the existing mortgage.
The original reference to a “credit acquisition company” was replaced with the terms “credit purchaser” or “purchaser of credit facilities,” in line with the definitions set out in the Credit Servicers and Credit Purchasers Law. Both laws passed unanimously and the President is expected to sign them.
The interest rate cap: Supreme Court referral possible
The most contested measure is the interest rate cap proposal submitted jointly by AKEL, DIKO and DEPA, which prohibits banks from charging additional interest once the total amount owed — including accumulated interest — reaches double the original debt.
President Christodoulides had flagged in his referral that the measure introduced indirect retroactivity, affecting rights already established under existing loan contracts in a way that infringes on freedom of contract.
At Thursday’s Finance Committee session, MP Valentina Georgiадou argued the proposal could carry retroactive effect, pointing to past instances where loan contract terms were altered by legislation. The Finance Ministry representative, however, said the measure could not be applied retroactively and should apply only to new loan agreements.
Parliament partially accepted this referral and amended certain provisions, but sources say the President may decline to sign the law and instead refer it to the Supreme Court.
New tool for borrowers facing foreclosure
Parliament partially accepted DIKO’s proposal, which is expected to receive the President’s signature. The law gives district court judges — who handle financial disputes between borrowers, guarantors, security providers and creditors — the power to issue an order setting aside a Type IA foreclosure notice.
In practice, a mortgaged homeowner facing foreclosure can apply to have the notice set aside. After 12 months, the creditor may issue a new notice and proceed, unless the court decides otherwise. A court may set aside a new notice only if special grounds exist and provided the borrower is not acting in bad faith.
The measure operates as a parallel process alongside existing foreclosure law, giving affected borrowers an additional avenue of protection.