We have previously written about the European Commission’s “action plan” for tackling non‑performing loans (“NPLs”) in the aftermath of the COVID-19 pandemic where we also provided an update on the draft EU Directive on credit servicers, credit purchasers and the recovery of collateral (the “Credit Servicing Directive”). The proposed text of the Credit Servicing Directive has been the subject of trilogue discussions between the European Commission, the Council of the European Union and the European Parliament since February 2021.
It was announced earlier this week that negotiators on behalf of the European Parliament have agreed with the Council of the European Union on common standards regulating the transfer of NPLs (the “June 2021 Announcement”). A draft of the agreed proposals has not been published as the European Commission, the Council of the European Union and the European Parliament continue to work on the technical aspects of the text.
One key aspect of the initial draft of the Credit Servicing Directive published in March 2018 was that it provided that EU Member States could not subject NPL purchasers to any additional requirements for the purchase of NPLs other than as provided for by the national measures transposing the Credit Servicing Directive (the “Anti-Gold-Plating Provision”). This aspect of the initial draft of the Credit Servicing Directive was subject to extensive comment by the Council of the European Union and the European Parliament with both institutions looking for EU Member States to retain the ability to regulate NPL purchasers in respect of, amongst other areas, consumer protection law. The June 2021 Announcement states that NPL purchasers will not need “special authorisation but will have to comply with borrower protection rules”. This may suggest that some of the comments raised by the Council of the European Union and the European Parliament on the Anti-Gold-Plating Provision have been included in their agreed proposals for the Credit Servicing Directive.
The European Commission welcomed this political agreement between the Council of the European Union and the European Parliament.
The developments outlined above will be of note for NPL purchasers in the Irish market. Unregulated purchasers of Irish consumer and SME loans originated by regulated entities were obliged following the introduction of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the “2015 Act”) to appoint an authorised credit servicing firm to service these loans. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 (the “2018 Act”) introduced an additional regulatory requirement for legal title holders of and persons who hold strategic control over Irish consumer and SME loans originated by regulated entities. A firmer assessment of the likely impact of the Credit Servicing Directive on the Irish regulatory landscape, including whether the final text of the Credit Servicing Directive will more closely reflect the 2015 Act or the 2018 Act, should be possible following the publication of the next draft of the Credit Servicing Directive.