"Red credits": changes coming for funds and service companies

The Prime Minister is officially handing over the red loan bill to be introduced into Parliament and, as OT has already written, it sets out rules for debt managers and funds.

At a meeting of the Cabinet of Ministers on Wednesday, the ministry’s bill on debt collectors, an extrajudicial mechanism for “collecting” debts and the loan market will be discussed. After this, Minister of Economy and Finance Kostis Hatzidakis will hold a press conference.

Around mid-October, the Ministry of National Economy and Finance should present a new bill, which, according to the authors, should bring order to the market “management-reclamation of “red loans””.

After violations were identified, especially in terms of informing debtors, the bill modernizes the funds’ information systems. That is, through the platform it will be possible to update information in real time. It is expected that the ministry will give companies time to make adjustments to information systems.

The plan will also include a directive EU 2167/2021, which entered into force on December 28, 2021 and must be adopted by states before December 29, 2023.

Improvements to debt facilities – loans from non-banks

Improvements are expected in the out-of-court mechanism as the main tool for resolving debts through viable arrangements to give businesses and households breathing space, but at the same time it is expected to “close the door” on strategic defaulters.

The Ministry of Finance is also preparing to expand the framework microcredit, whose main purpose is to provide access to finance to households and businesses deemed unsuitable by banks. The new structure will facilitate the entry of non-bank institutions into the Greek market for loans in excess of EUR 25,000. These non-bank institutions will be supervised by the Bank of Greece.

Framework program

Under the new framework for servicers: They will be required to store and provide personalized information to debtors who do not currently provide information on total debt, outstanding installments, interest rate and other relevant data.

There will be penalties for failure to provide citizens with clear and timely information

The goal is that red loans will be administered under stricter rules to protect debtors. The new system will impose specific obligations on management companies and, in addition to these community rules, additional national legislation will be introduced to ensure maximum protection of debtors’ rights.

There is extensive information about a borrower’s debt, which means that servicers will have to create a database.
They will be required to provide details of borrower services, complaints and adjustments to the supervisor to be appointed. Among other things, penalties will be provided, especially in cases of failure to timely inform and close the debt.

Liabilities
The main focus of the obligations of service organizations (collectors) will be on EU Directive 2167/2021, which provides for:

• fair treatment of borrowers of both consumer and business loans, including complaints procedures;
• informing borrowers about the purchase of their loan by the fund;
• the terms of their agreement with the loan buyer;
• records management;
• storage of client funds;
• outsourcing to third parties;
• compliance by funds with certain obligations imposed on them by the directive and, if required by Member States, by national law.

Note that at the end of the second quarter of 2023, the nominal value of loans managed by funds and collectors increased. This amount amounts to 71.164 billion euros, compared to 70.494 billion euros at the end of the previous quarter.

That is, according to the Bank of Greece, loans managed by the Greek ΕΔΑΔΠ (Association of Companies for the Management of Loans and Receivables) and transferred to specialized international financial institutions (collection agencies) increased by 670 million euros in the second quarter of 2023.

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