A spotlight on the role of the Financial Commissioner’s Office

Increasing the positive outcome of out-of-court dispute resolution procedures, through the strengthening of the amicable settlement process, the strengthening of financial literacy and the digital transformation, are the three main objectives of the Unified Body for the Out-of-Court Resolution of Financial Disputes and, by extension, the Office of Financial Commissioner, Valentina Georgiadou.

This is stated, among other things, in an explanatory note accompanying the Agency's 2025 budget recently tabled in Parliament.

Moreover, according to data provided by the Office of the Financial Commissioner, the complaints it receives from citizens against banks, insurance companies and CIFs have been increasing year by year, something which is expected to continue in 2025.

The goals

Regarding the objectives of the Body for the Out-of-court Resolution of Financial Disputes, based on the explanatory memorandum, the first objective of the Office of the Financial Commissioner is to increase the positive outcome of out-of-court settlement procedures and to strengthen the amicable settlement process.

As it is typically stated, "the non-binding nature of the Financial Commissioner's decisions weakens the role and resources available to them, in line with their purpose".

"The low rate of acceptance of the issued decisions of the Financial Commissioner by financial companies, demonstrates the necessity of the existence of a relevant regulation, so that the decisions of the Financial Commissioner become binding for the parties, in order to extend and further ensure the effectiveness of its institutional role, for the benefit of consumers, financial businesses and the economy in general," it is added.

It is within this framework, it is underlined, that the Financial Commissioner will in the initial phase cooperate with the financial companies for the positive outcome of the out-of-court resolution process, in a consensual and mutually acceptable manner that will lead, at a later stage, to the legislative regulation of binding of the decisions.

"The possibility provided for the first time to eligible debtors to approach the Financial Commissioner, for purposes of verifying the required balance, is a first step in this direction", it is emphasised.

The goal for 2024-2025, it is pointed out, "remains the strengthening of the effort to reach solutions through amicable settlement, as well as the increase in the number of cases resolved through this process."

"This will primarily result in the resolution of disputes quickly and efficiently without endless court proceedings that involve costs and time for all parties," it further states.

Financial literacy

Strengthening financial literacy has been set as the second objective of the Office of the Financial Commissioner, since, as explained, the tools offered to consumers through legislation are not activated automatically and autonomously.

For their activation and effective use, it is emphasised, their constant vigilance and their immediate mobilisation to prevent unpleasant developments is required.

Undeniably, it is indicated, there is a need for further information to be made available to consumers, regarding the operation of the out-of-court dispute resolution institution, so that it can be useful and effective, providing positive results both to consumers and to the economy in general.

"The high number of closed complaints, as well as the backlog of complaints sent to the Financial Commissioner's Office by consumers, who seek its intervention in various financial problems they face and which, unfortunately, cannot be resolved into legitimate complaints, indicate the need for continuous consumer information," it is also stated.

Also based on the memorandum, “financial literacy is a protective shield against an increasingly complex international economy and financial system. Financially informed and educated citizens can manage their financial issues and problems in a more efficient way."

As far as Cyprus is concerned, it is mentioned that the stock market crisis of 2000, the crisis of 2013 as well as the large number of non-performing loans (NPLs) concerning households have highlighted the fact that a significant part of the population in our country seems to does not have sufficient basic financial knowledge or rational attitudes and mindsets in financial matters.

This, it is emphasized, makes them susceptible and vulnerable either to negative economic conditions or to conditions where their counterparties have a more favourable financial position or information.

Therefore, it is underlined, the Office of the Financial Commissioner can play an important role in reducing the level of financial illiteracy, in the context of continuous consumer information.

In this context, the Office accepted an invitation to participate in the e Cyprus Financial Literacy and Education Committee (CyFLEC), which aims at the financial literacy of citizens.

In addition, in the next period of time, the Agency will organize seminars/lectures aimed at informing the citizens in relation to its responsibilities and the new regulatory framework.

Digital transformation

In relation to the third objective of the Office of the Financial Commissioner, this concerns digital transformation and includes actions to upgrade and improve the operational system for handling complaints from citizens.

As mentioned, one of the Agency's priorities is the implementation of the government system, so that the entire process of submitting a complaint, up to and including its completion, is done in digital form.

Through this system, it is added, it is expected that a series of procedures for submitting, evaluating and archiving the complaints submitted will be automated.

The main objective, it is emphasised, is to avoid, as far as possible, the filing of printed material, which will contribute to the continuous improvement of the Agency's work, both in terms of quality and speed.

Complaints are increasing

However, according to data cited by the Office in its memorandum, the rate of complaints submitted to it has been increasing in recent years, which is expected to continue in the coming years, due to the socio-economic and political developments that consumers have faced in last 2-3 years.

As mentioned, the effects of the pandemic, the war in Ukraine and, more recently, the new geopolitical crisis combined with the dramatic increase in interest rates and inflation, inevitably affect all consumers, in relation to their financial decisions.

In addition, it is emphasised, the large stock of inherited non-performing loans (NPLs), as well as the recovery of collateral (foreclosures) mainly of the first home, continues to plague a large number of households.

In view of these data and the continuous suspensions of first home sales, it is underlined, the House of Representatives proceeded in December 2023 to pass legislation aimed at protecting vulnerable borrowers.

The new regulatory framework expands, among other things, the powers of the Financial Commissioner, something which is expected to bring about a significant increase in the number of complaints that will be submitted by consumers against financial companies.

All of the above, it is underlined, in combination with other issues of a financial nature that remain open such, for example, the issue of guarantors, and abusive clauses in contracts, are expected, as mentioned above, to create an increased workload for the year 2025 at the Agency.

As far as the Investment Business sector is concerned, it is indicated that attention should be paid to the ever-increasing interest of consumers in investing in high-risk products (for example compound products (CFDs), structured products, CFDs on cryptocurrencies, etc.) something which, as can be seen from the submission of complaints to date, are not suitable for a large number of consumers.

In light of this, but also of the rapid evolution of the industry, it is expected that the consistently increased number of complaints will continue in 2025.

Based on the data provided by the Office of the Financial Commissioner, the majority of complaints received from citizens concerned CIFs and credit institutions.

Based on the same data, the complaints concerned, among others, obligations and abusive clauses by banks, non-payment of claims by insurance companies and misinformation by CIFs.

(Source: InBusinessNews)