Greek NPLs: New rules for debt managers and funds

Around the middle of October, the Ministry of National Economy and Finance is expected to submit the new draft law which brings order in the market for the management and collection of non performing loans. After the irregularities, and especially with regard to the part of informing debtors, the bill – which the government is working on brings an upgrade of the information systems of the funds as they will inform the supervisor in real time through a platform. The ministry is expected to give time to the companies in question to make the system adjustments related to the update.

The plan, according to information, is almost ready and the last changes are being made in order to have it voted by the end of the month. It will also incorporate Community Directive 2167/2021, which entered into force on December 28, 2021 and must be adopted by states by December 29, 2023.

It should be noted that at the end of the second quarter of 2023, the nominal value of loans under management from funds and servicers increased. The amount comes to to 71.164 billion euros, from 70.494 billion euros at the end of the previous quarter. In other words, according to the data of the Bank of Greece, the loans managed by domestic credit unions and transferred to specialized financial institutions abroad increased by 670 million euros in the second quarter of 2023.

Transparency otherwise severe penalties

According to the new framework, servicers will be required to keep and provide personalized information to debtors about their total debt, the installments due, the interest rate and other relevant information, which they currently do not provide. Penalties will also be provided when they do not provide clear and timely information to citizens.

Following the proposals of the Bank of Greece, which has the responsibility of supervision – the transparency of the operation of the servicers will increase. Thus, bad loans will be managed with stricter rules to protect debtors. The new framework will impose specific obligations on service companies and, in addition to these EU rules, the government imposes on servicers additional provisions of national law in order to maximize the protection of debtors’ rights.

Debt information

Extensive information on the borrower’s debt is defined, which means the creation of a database by the servicers. The management companies will have to submit to the supervisor, to be appointed, the details of the servicing of the borrowers, complaints and arrangements. Among other things, it will provide for penalties, especially in cases where there is no timely notification and termination of the debt.

The main axis of the obligations of the servicers will be the Community directive 2167/2021 which provides:

• the fair treatment of both consumer and business loan borrowers, including complaints handling procedures

• information to borrowers regarding the purchase of their loan from the fund

• the terms of their agreement with the buyer of the loan

• record keeping

• the holding of customer funds

• outsourcing to third parties, and

• compliance by the funds with certain obligations imposed on them under the Directive and, if Member States require, national legislation.