The present news item deals with the European Directive’s objectives, its intended functions, its status within Cyprus Law and whether the Directive has been incorporated into the national legal framework.
The goal of the European Directive 2021/2167
The objective of the European Directive aims to create a common framework and a set of requirements governing how credit servicers and credit purchasers deal with substantial volumes of non-performing loans and the potential for future accumulation by credit institutions. This involves the enactment of specific measures by the institutions.
Means of achieving the goal
In order to achieve this goal, critical actions and procedures are required. In particular, credit servicers must receive a license to operate before starting their activities from qualified authorities, through a specific procedure. Once the managers have received such permission, they are granted the freedom to carry out credit management activities in a host Member State (MS). However, the services must adhere to restrictions or requirements established in the national law of the host MS, in accordance with this Directive. The activities must also be supervised by authorized competent authorities. It is also important to have a relationship of trust, honesty and clear communication between credit servicers/ credit purchasers and borrowers.
In regard to the contractual relationship between credit servicer and credit purchaser, in the event that the latter does not manage a specific case, it must be ensured by the Member States that this is achieved by a servicer, while given that the outsourcing from a credit servicer to a credit service provider, after first being informed the competent authorities, the responsibility of the former is retained for the fulfilment of the obligations arising from the national provisions for the transposition of this Directive into National Law.
Concerning the contractual relationship between a credit servicer and a credit purchaser, if the credit purchaser does not oversee a particular case, it is the responsibility of the Member State to ensure that a manager is appointed to handle it. Additionally, if the credit manager decides to outsource tasks to a credit service provider, they must inform the competent authorities. In such cases, the credit manager remains accountable for meeting the obligations set forth in the national provisions for implementing this Directive into National Law. With a relevant request, the administrator and credit provider shall duly inform the competent authorities with relevant information.
Credit purchasers are entitled to access information pertaining to the creditor’s rights within a nonperforming credit agreement or the non-performing credit agreement itself. This information is transmitted by authorities to the competent authorities of the credit buyer’s home Member States on semi-annual basis. The third-country credit buyer appoints an agent who has domicile and/or registered office, or a head office in the Union.
Borrower protection is guaranteed by credit managers through the implementation of efficient procedures for addressing borrower complaints, offered at no cost, and by making the complaint-handling process transparent through oversight by relevant authorities.
Ultimately, effective cooperation among competent authorities in exercising their duties and coordinating their actions to avoid any repetitions is crucial.
When modification to the terms and conditions of a credit agreement have been implemented, the creditor is obliged to notify the consumer accordingly. In situations where there are arrears, the creditor must take into account the financial situation of the consumer before pursuing forced execution. Moreover, if the creditor’s rights from a credit agreement are transferred to a third party, the consumer is entitled to object against the transferee/assignee. The same defense mechanisms that were available against the original creditor, subject to the rules permitted by the Member States concerned.
Incorporation of the European Directive into Cyprus Law
Cyprus is in the process of integrating the said European Directive into national legislation. To achieve this objective, the Ministry of Finance has proposed, around January 2023, five bills which are as follows:
- Bill A: “The Credit Administrators and Credit Purchasers and Related Matters Law of 2023” including correspondence table (Appendix A).
- Bill B: “The Consumer Credit Contracts (Amendment) Law 2023” including correlation table (Appendix B- revised text).
- Bill C: “The Credit Agreements for Consumers relating to Residential Property (Amendment) Law 2023 “including correlation table (Appendix C- revised text).
- Bill D: “The Liberalisation of the Interest and Related Matters (Amendment) Law of 2023”
- Bill E: “The Immovable Property (Possession, Registration and Valuation) (Amendment) Law of 2023”.
By Styliani Fotiou.
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