On 9 November 2021, the proposed Directive on credit servicers and credit purchasers(the "Directive") was approved by the EU Council. This follows its approval by the European Parliament in October. The Directive will now be published in the Official Journal of the European Union and will enter into force on the 20th day following publication. EU member states will then have to transpose the Directive into national law within 24 months.
The Directive applies only to non-performing loans ("NPLs") issued by a credit institution established in the EU. Credit servicers in scope must obtain an authorisation in their home EU member state and will then have the right to provide those services in other EU member states.
In-scope credit purchasers will not need to be regulated under the Directive and will not be subject to any additional requirements for the purchase of NPLs, other than as provided for by the national legislation transposing the Directive, or by applicable consumer protection law, contract law, civil law or criminal law.
As set out in our August 2021 update, the impact of the Directive on the existing credit servicing regulatory framework in Ireland remains somewhat unclear. For example, it is not clear:
- whether legal title holders or persons who hold strategic control over Irish consumer NPLs and Irish SME NPLs originated by regulated entities will continue to be required to be authorised to carry on the business of a credit servicing firm;
- whether Ireland will seek to continue to apply the existing credit servicing regulatory framework to performing loans;
- whether Ireland will seek to continue to apply the existing credit servicing regulatory framework to loan transfers completed before the transposition deadline for the Directive; and
- how the requirements of the Directive will be implemented within the existing broader credit servicing regulatory framework in Ireland.
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