EOS successfully implements the provisions of the NPL Directive

Occasionally, something that initially seems unremarkable can have far-reaching consequences. At the end of 2021, the EU Directive 2021/2167 on credit servicers and credit purchasers entered into force in Europe. Within the European Union, it is designed to provide a uniform framework for the purchase and processing of non-performing loans (NPLs). Currently, the regulation generally referred to as the “NPL Directive” is being implemented into the national laws of the member states, and is fundamentally changing the market as a result.

Companies like EOS that invest in loan portfolios and are experts in receivables management now need an authorization from the respective country – and must meet precisely defined requirements in respect of management, processes, and their interaction with consumers.

EOS is a byword for industry leadership, so compliance with statutory requirements and industry regulations is a given for the EOS Group. The company is working hard to implement the provisions of the national laws resulting from the Directive, and can already report numerous successes. “Operational responsibility for implementation lies with our national subsidiaries. But as a Group, we are coordinating the exchange of information and best practices and are available as the main point of contact,” says Freda Stockfleth, Senior Vice President Corporate Legal. It’s a good example of the synergies that result through the company’s internationality.

The basic idea behind the NPL Directive was to reduce the high inventories of non-performing loans in the balance sheets of banks within the EU. Previously, there was no common legal framework in EU countries for handling NPLs. The objective of the directive is therefore:

• To standardize the regulations for credit servicers and credit purchasers in the EU,
• simplify the sale of NPLs, including across national borders,
• and strengthen the rights of consumers.

The new requirements to be met by credit servicers include:

• Rules of conduct for fair and transparent dealings with borrowers
• Information obligations towards borrowers
• New risk management and compliance processes and verification of internal control mechanisms
• Reporting obligations to the respective national supervisory body

For many companies operating in the receivables management segment, the establishment of and adherence to the new regulations necessitate a comprehensive expansion of structures and processes, additional reporting, and extra compliance efforts. The EOS Group is leading by example: “In all relevant countries, EOS has either already received or applied for the corresponding authorization or will apply for it within the period specified,” says Stockfleth.

Currently, EOS companies in Germany, France, Denmark, Greece and Croatia have obtained the relevant authorization. In other countries like the Czech Republic, the Group will submit its application soon. Wherever that has not yet happened, this is due to the different implementation rates of the countries involved. The deadline for implementing the regulation into national law was actually December 2023. But in some cases only a draft implementation act is available (e.g. in Spain, Belgium and Poland) – or there is not even a published draft (as in Austria and Portugal). 

Two national subsidiaries show how EOS companies are meeting the requirements of the NPL Directive at local level.

In Greece, the directive has been implemented through Act 5072/2023 and other provisions that have been in force since December 2023. This resolved critical questions on the legal representation of credit servicers and simplified various processes. However, there were still considerable challenges to be mastered.

There are now stricter regulatory requirements e.g., with a view to the fair treatment of borrowers, including clear communication about debt collection processes, the protection of their rights, and data privacy mechanisms. Credit servicers must apply for a license and submit regular reports to the Greek National Bank and the Ministry of Economic Affairs. Likewise, advanced risk management systems have to be developed to identify and mitigate the risks associated with NPL portfolios.

EOS Greece was very quick to deliver results: “We obtained our new servicing license at the end of June 2024 and updated our online systems like the payment portal for consumers,” says Anthony Messados, Managing Director EOS Greece. To this end, in accordance with requirements, the Greek national subsidiary developed a personalized information system that provides borrowers with up-to-date information, e.g. detailed records of due amounts, costs or the interest rate applicable.

Denmark transposed the NPL Directive into Danish law in December 2023. Peter Hægerstrand Jensen, Managing Director EOS Denmark, identifies both challenges and opportunities in the new law. “On the one hand, the authorization process for a license as a credit servicer represented an extensive and intensive workload.” But it was worth it: EOS Denmark received its license from the Danish supervisory body in June 2024.

Furthermore, the documentation of compliance and governance processes involved much more paperwork than before, even though EOS Denmark had already placed a strong emphasis on this in the past.

On the other hand, the new rules also opened up new opportunities – because Danish regulations had previously hindered banks from selling portfolios. “These obstacles were eliminated when the directive came along. This is why in future we expect an even greater volume of business,” says Jensen.

It will probably take a few more months until the NPL Directive has become law in all EU countries and the market really is harmonized. In many places, EOS national subsidiaries have shown how the directive can be implemented efficiently.