NPL Directive
Contents
Definition
NPL Directive is the informal name of 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.[1]
Scope
The Directive lays down a common framework and requirements for:
- Credit servicers acting on behalf of a credit purchaser in respect of a Creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself, issued by a credit institution established in the Union in accordance with applicable Union and national law
- Credit purchasers of a creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself, issued by a credit institution established in the Union in accordance with applicable Union and national law.
Not in Scope
- Services offered for credit agreements issued by non-credit institutions
- Credit servicing activities performed by natural persons
- The outsourcing by credit institutions of credit servicing activities, in relation to both performing and non-performing credit agreements, to credit servicers or to other third parties because credit institutions are already required to observe the applicable outsourcing rules
Motivation
The Directive should enable credit institutions to better deal with loans that become non-performing by improving conditions for the sale of the credit to third parties. Moreover, when credit institutions face a large build-up of NPLs and lack the staff or expertise to properly service them, they should be able either to outsource the servicing of those loans to a specialised Credit Servicer or to transfer the Credit Agreement to a Credit Purchaser that has the necessary Risk Appetite and expertise to manage it.
The lack of competitive pressure on the market for purchasing credit and for credit servicing activities results in credit servicing firms charging credit purchasers high fees for their services and leads to low prices on secondary markets for credit. That reduces incentives for credit institutions to offload their stock of NPLs.[2]
Requirements Overview
- Authorisation of credit servicers
- Procedure for authorisation of credit servicers
- Withdrawal of authorisation
- List or register of authorised credit servicers
- Relationship with the borrower, communication of the transfer and subsequent communications
- Contractual relationship between a credit servicer and a credit purchaser
- Outsourcing by a credit servicer
- Cross-border credit servicing activities
- Supervision of credit servicers which provide cross-border services
- Credit Purchasers Right to information regarding a creditor’s rights under a non-performing credit agreement
- Implementing technical standards for data templates
- Obligations of credit purchasers
- Use of credit servicers or other entities
- Representative of a third-country credit purchaser
- Transfer of a creditor’s rights under a non-performing credit agreement by a credit purchaser and communication to the competent authorities
- Supervision by competent authorities
- Administrative penalties and remedial measures
- Safeguards and Duty to Cooperate (Complaints, Personal Data Protection, Cooperation between Competend Authorities)
