Eight interventions to manage private debt and protect vulnerable borrowers

The n/s for servicers is in public consultation

Measures to protect vulnerable borrowers, strengthening transparency in information of borrowers from servicers and the strengthening of competition within the banking system provides for the bill of the Ministry of National Economy and Finance which was put today in public consultation http://www.opengov.gr/minfin/?p=1209 until Wednesday, November 22.

The bill “Loans: Transparency, competition, protection of the vulnerable – Incorporation of Directive (EU) 2021/2167” introduces regulations which, among other things, create a new network of obligations regarding the information of citizens by servicers, bring about substantial changes in the out-of-court mechanism, in the bankruptcy process and in the real estate acquisition body shielding vulnerable debtors, while also promoting the granting of loans from non-banking bodies.

The Minister of National Economy and Finance Kostis Hatzidakis stated: “The Greek economy is steadily conquering important milestones by receiving a positive credit rating from internationally prestigious houses. Achieving investment grade boosts growth and facilitates investment by creating new jobs. Indeed, our economy is on an upward trajectory and fiscal seriousness. There remain, however, chronic pathologies that put barriers to further development and economic progress. Already, in the previous four years, important steps were taken to deal with overdue private debt. Today, with key interventions through the bill that was put to public consultation, we aim for the holistic, definitive and substantial management of private debt by shielding the truly vulnerable debtors while strengthening competition in the banking system.”

More detail, the provisions of the draft law are summarized in the following eight interventions:

1. Obligations of transparency, information and respect for debtors’ rights for servicers. In particular, it becomes mandatory for the servicers to provide personalized and detailed information to the debtors, regarding the amount of the debt, the history of payments, installments, the interest rate of the arrangement, etc. The information should be provided through a special digital platform (by analogy with the banks’ webbanking) which will be updated at least on a monthly basis and which should be operational by March 31, 2024 at the latest. At the same time, penalties are provided for may range from the imposition of a fine of up to 500,000 euros to the revocation of the operating license of companies that will not comply with the new operating network and the rules for the respect and protection of debtors.
2. Modernization and improvement of the extrajudicial mechanism. The proposal to restructure the debt of vulnerable debtors should be automatically and mandatorily accepted by all creditors. The debtor retains the right to reject the proposal, while creditors can challenge it in court if they have evidence that parameters of the application are not true. Thus, the protection for the vulnerable is shielded while at the same time providing safeguards to identify those who are truly vulnerable and not defaulters. In addition, for all debtors who have secured loans, the algorithm from which the amount of the write-off and the debt is obtained through the out-of-court settlement is improved. The specific regulation, which will come with a ministerial decision after the passing of the bill, leads to a reduction of up to 28% of the regulated debt from collateralized loans. Finally, in the same way, the interest rate of the arrangements will be set at 3% fixed for 3 years, while the possibility of joining the out-of-court settlement is extended to persons who “inherited” debts to the State and Social Security Institutions, which have been ascertained at the expense of businesses that have closed , through the completion of the provision and the immediate issuance of the relevant ministerial decision.
3. Anti-competitive arrangements, such as non-bank lending. A regulation is being introduced which provides that Credit Companies (CCPs) will henceforth be able to grant housing or business loans. At the same time, the licensing framework of the EPPs by the Bank of Greece will also be simplified.
4. Expansion of transactions implemented through the direct payment system (IRIS). In particular, freelancers and self-employed persons are required to link their business account to a direct payment system.
5. Improvement of the operation of the Real Estate Acquisition and Leasing Agency. Legislative amendments are being introduced with the aim of attracting the interest of investors in order to proceed with the tender process, and to relieve the vulnerable debtor of burdens during the repurchase. In more detail, the debtor’s obligation to pay the 12 years’ rent is lifted in the event that he exercises the right of repurchase earlier. At the same time, it is foreseen that the organization will acquire the properties with a discount of 30% on their commercial value or the price of the first offer. The debtor will also be able to benefit from this discount in the future when exercising the right of repurchase, as will be determined in the relevant ministerial decision.
6. Simplifying and speeding up Bankruptcy Code procedures. It is foreseen that upon the submission of the bankruptcy application, the financial data of the debtor are automatically sought by public bodies and banks, while any errors in the data can be corrected during the discussion of the bankruptcy application so that it is not declared inadmissible. In addition, a clear end to the bankruptcy process is entered with the determination of the occurrence of the discharge of the bankruptcy by act of the reporting judge.
7. Establishment of a Private Debt Monitoring Register. Data from public and private credit providers will be entered in the Register in order to determine as accurately as possible the total amount of private debt and its fluctuation trends in order to upgrade the State’s ability to intervene, when necessary, with the appropriate tools.
8. Immediate publication of the names of companies in which the Bank of Greece detects violations of the legislation. The Board of Directors will no longer be obliged to wait for the outcome of any legal appeals before proceeding to publicize violations in order to facilitate the immediate information of the public about illegal behaviors that would also affect their choices.