Cyprus wants to squeeze loan sharks

Cyprus plans to legislate against usury after an apparent spike in cases of people struggling with costly debt from loan sharks profiteering during the financial downturn.
Although there is no hard data, lawmakers debating the issue said the practice was on the rise. Cyprus does not regulate debt between individuals, with a legal vacuum leaving many exposed. The issue hit the headlines after a policeman killed in a gangland-style hit was found to have been involved in money lending. There have also been several reports of people on the Mediterranean island losing their homes due to unregulated debt.
"It has to be regulated… Our aim is to make it a criminal offence," said Petros Clerides, the Cypriot attorney-general.
Cyprus, an EU member since 2004, 10 years ago abolished a ceiling on interest rates to facilitate its accession to the bloc. That 9 percent ceiling applied to regulated activities such as banking and government transactions. Private transactions have never been regulated.
It is now looking at laws in several EU states, including Malta and Greece, to see what can best be applied to Cyprus.
Malta has a ceiling on how much interest is allowed in private contracts; in Greece it is a criminal offence to exploit an individual for disproportionate gain.
"There should be a definition of what usury actually is," said Athanasios Orphanides, Cyprus's Central Bank governor and a member of the governing council of the ECB.
"We must ensure that any attempt is actually enforceable. The difficulty would be to regulate what we consider excessive charging, exploitation, and the mechanism to enforce it."
Speaking in parliament, Orphanides disagreed with a suggestion from one lawmaker that the lending policies of commercial banks pushed borrowers into the hands of loan sharks.
"One cannot expect banks to give loans, on good terms, to just about anyone who asks. What we can do, and do, is ensure that there is healthy competition between banks," he said.
Police say the usury practice cannot be curbed entirely. "We have all heard the tales from our grandfathers on how they lost a field for a fiver," Charalambous said. "It's an old problem."