WHAT IS THE AIM OF THE DIRECTIVE?
- It harmonises the rules for credit servicers1 and credit purchasers2 of a creditor’s rights under a non-performing credit agreement.
- Its aim is to support development of secondary markets for non-performing loans3 in the European Union (EU), while ensuring the sale of such loans does not undermine borrowers’ rights.
KEY POINTS
The directive, apart from some clearly defined exemptions, applies to both credit servicers and credit purchasers of a creditor’s rights under a non-performing credit agreement.
Authorisation of credit servicers
Credit servicers must:
- require authorisation from the relevant national authority;
- meet certain conditions (failure to do so are grounds for refusal of an application), notably:
- be a legal person and have their registered or head office in that EU Member State,
- demonstrate members of their management or administrative bodies are of good repute with a clean police record, have not been declared bankrupt and have the knowledge and experience to act competently and responsibly,
- employ robust governance and adequate internal controls,
- follow rules for the protection and fair and diligent treatment of borrowers and for recording and handling their complaints free of charge,
- apply adequate anti-money laundering and counterterrorist financing procedures,
- be subject to national reporting and public disclosure requirements.
National competent authorities must:
- apply an authorisation procedure for credit servicers requiring them to prove they meet all the conditions;
- decide within 90 days whether to grant or refuse authorisation;
- have supervisory, investigatory and sanctioning powers and may, in certain circumstances, withdraw an authorisation;
- maintain a publicly accessible online register of all credit servicers;
- allow, subject to certain conditions, credit servicers authorised in one Member State to practise elsewhere in the EU.
Credit purchasers and credit servicers, in their dealings with borrowers, must:
- act in good faith, fairly and professionally;
- provide information to borrowers that is not misleading, unclear or false;
- respect and protect the personal information and privacy of borrowers;
- not harass, coerce or unduly influence borrowers;
- provide the borrower with the following information after the transfer of a creditor’s rights and before the first debt collection, or whenever a borrower so requests:
- the date of the transfer and identity and contact details of the credit purchaser,
- the amounts the borrower owes, broken down into capital, interest, fees and other charges,
- a statement certifying that all relevant EU and national laws continue to apply,
- the name, address and contact details of the relevant national authorities.
Right to information
Credit institutions must:
- provide prospective credit purchasers with information on a creditor’s rights so they may themselves assess the likelihood of recovering the outstanding loan;
- give information, such as credit purchasers’ details and aggregate outstanding balance of the transferred credit portfolios, including their number and size, to their national authorities twice a year.
Credit purchasers transferring a creditor’s rights must, twice a year and possibly quarterly, give the relevant authorities details of the new purchaser and information such as the aggregate outstanding balance.
Member States are responsible for establishing appropriate administrative penalties and remedial measures for breaches of the directive.
The European Banking Authority issues guidelines and technical standards on detailed aspects of the directive.
The directive amends Directive 2008/48/EC (see summary) and Directive 2014/17/EU (see summary).
The European Commission reports on:
FROM WHEN DO THE RULES APPLY?
- The directive had to be transposed into national law by 28 December 2021. These rules apply from 30 December 2023.
- In accordance with national law on 30 December 2023, entities already carrying out credit servicing activities will be allowed to continue to do so in their home Member State until 29 June 2024 or until the date on which they obtain an authorisation in accordance with this directive, whichever is earlier.
BACKGROUND
- A bank loan is generally considered non-performing when more than 90 days pass without the borrower paying the agreed instalments or interest, or when it becomes unlikely to be reimbursed.
- Efficient management of non-performing loans reduces risks in banks’ balance sheets, enabling them to focus on lending to businesses and individuals.
KEY TERMS
- Credit servicer. A legal person that manages and enforces a creditor’s rights and obligations under a non-performing credit agreement.
- Credit purchaser. A natural or legal person, other than a credit institution, that purchases a creditor’s rights under a non-performing credit agreement or the agreement itself.
- Non-performing loan. Bank loan subject to late repayment or unlikely to be repaid by the borrower.
MAIN DOCUMENT
Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU (OJ L 438, 8.12.2021, pp. 1–37).
RELATED DOCUMENTS
Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, pp. 34–85).
Successive amendments to Directive 2014/17/EU have been incorporated in the original text. This consolidated version is of documentary value only.
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1–337).
See consolidated version.
Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (OJ L 331, 15.12.2010, pp. 1–11).
See consolidated version.
Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, pp. 12–47).
See consolidated version.
Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, pp. 66–92).
See consolidated version.
