Loan audit: where errors are found and what the law says

1. Abusive general terms

General Terms of Business are examined under Law 2251/1994 on consumer protection. Terms that significantly upset the balance of rights and obligations to the consumer's detriment are void, and extensive case law from Greek courts and the EU Court of Justice has developed for specific categories of terms.

In practice, we mainly check transparency: whether the method of calculating the interest rate, charges and surcharges was understandable and predictable for the average consumer at the time of signing.

2. Law 128/1975 levy

This is a levy imposed on granted loans that, by law, is borne by credit institutions, with a different rate per loan category. The issue we examine is twofold: whether its pass-through to the borrower was done through a valid and transparent term, and — crucially — whether the levy was incorporated into the interest calculation base, leading to a charge upon a charge.

3. Compound interest and default rate

Compound interest on overdue interest is permitted only under the conditions and frequency specified by special banking legislation (particularly Article 12 of Law 2601/1998) in conjunction with Bank of Greece acts. Applying more frequent capitalization or calculating default interest on already compounded amounts is among the most common findings.

The level and basis of the default interest rate are also checked, as well as the date from which it was applied — particularly when the contract was previously terminated.

4. Interest calculation, value dates and charges

• Day-count basis (e.g. 360-day year vs. 365) and its impact on the effective rate.
• Value dates for deposits and debits.
• File fees, valuations, insurance and how they were incorporated into costs.
• Correct application of reference rate changes (Euribor and margin).
• Correct allocation of payments: how they were split between principal, interest and charges.

5. Statute of limitations

Claims are subject to limitation periods of the Civil Code. Indicatively, claims for interest and periodic benefits prescribe in five years (Article 250 CC), while the general limitation period is twenty years (Article 249 CC). The exact start time and grounds for interruption or suspension are assessed case by case and decisively affect what can be claimed.

What we do with the findings

An audit is only valuable if it results in a written, documented report with quantified differences. From there, the path is chosen: negotiation with the bank or servicer, banking mediation, inclusion in a better-based arrangement, or referral to legal action with the file already prepared.