Credit Servicing Directive update: where are we now and what’s next?

Introduction

On 7 June 2021, the European Parliament has announced that political agreement in trialogue has been reached with the EU Council on the proposed Directive on credit servicing. The provisionally-agreed text of the proposed Directive can be found here.

There have been some minor changes to text of the Directive since our last update, and the European Parliament, Council and Commission are still working on the technical aspects of the text. We will publish further updates when the text is finalised (expected to be around Q3 or Q4 2021).

Key Takeaways

• The new proposed definition of  “credit servicing activities” means one or more of the following activities:
  
  (a) collecting or recovering from the borrower any payments due under a credit agreement;
  
  (b) renegotiating with the borrower any terms and conditions related to a creditor’s rights under a credit agreement;
  
  (c) administering any complaints relating to a creditor's rights under a credit agreement;
  
  (d) informing the borrower of any changes in interest rates or charges or of any payments due related to a creditor’s rights under a credit agreement.

• The current Irish credit servicing framework is expected to change to align with the Proposed Directive. There are some activities that currently trigger authorisation in Ireland but go beyond the Directive’s requirements such as holding legal title, determining strategy, or maintaining control over key decisions relating to credit agreement etc. These are likely be removed in light of the Proposed Directive.
• Once the Directive is transposed into Irish law (expected to be around Q3 or Q4 2023), those who purchase non-performing loans (NPLs) originated by EU banks are unlikely to need authorisation to do so.
• Legal entities carrying out in-scope “credit servicing activities” can obtain authorisation in their home Member State and then passport that authorisation across the EU.

For more information on how the proposed Directive might impact the Irish regime, please see our previous article here.