The Nicosia District Court has recently issued a decision in which it ruled, certain terms included in loan agreements of a specific Financial Institution, as abusive. Specifically, the Court ordered the immediate termination of and refraining from the use of these terms, and the publication of the full decision or an excerpt, or a corrective announcement, in a Cypriot newspaper.
The terms that were deemed by the Court as abusive included, among others:
- The unilateral imposition of fees, charges, and interest by the Financial Institution.
- The termination of subsidies or modification of interest rates at the sole discretion of the Financial Institution.
- The alteration of the loan duration and repayment installments without the borrower’s consent.
- The ability to demand immediate repayment of the entire loan in the event of any breach of the terms.
The Consumer Protection Service in Cyprus, upon reviewing consumer complaints concerning contracts with Financial Institutions, has on multiple occasions found numerous provisions within these contracts to be abusive. However, with the issuance of these decisions by the Service, Financial Institutions were not obligated to revise or remove the relevant provisions from their contracts.
Based on the legislation in force until 2021, regarding abusive clauses, the Service retained the right to apply to the Court requesting the issuance of a prohibitory injunction against the enforcement of the provisions deemed to be abusive. This right, however, had not been exercised by the Director of the Consumer Protection Service until 2021.
In 2021, the Director of the Consumer Protection Service exercised this right, initiating proceedings in the Nicosia District Court, which concluded in May 2025 with the issuance of the aforementioned decision, declaring specific provisions included in loan agreements as abusive.
Although the procedure commenced under the previous legal framework, the Court ruled that the rights and obligations of the parties involved were not altered in relation to the ongoing legal process. The Court proceeded to examine and assess the challenged terms of the loan agreements.
This outcome and the declaration of certain terms as abusive was not unexpected by the Financial Institutions, as the abusiveness of similar terms has been examined and confirmed in numerous previous judgements by courts in other European Union countries—decisions which the Cypriot Court also took into consideration.
This decision marks a significant development in the Cypriot legal landscape, and it remains to be seen how each Financial Institution will evaluate and respond to similar provisions currently included in their loan agreements.
