The proposed Directive on credit servicers and credit purchasers was approved by the EU Council yesterday, 9 November 2021, following its approval by the European Parliament on 19 October 2021, paving the way for its publication in the Official Journal – we expect this to happen in the next couple of weeks.

The text that was voted on is here, with one very minor amendment to one of the Recitals here.

SCOPE

As mentioned in our recent briefing (NPL Update: Scope of Credit Servicing Directive agreed), political agreement was reached in June 2021 to narrow the scope of the proposed Directive to the servicing (on behalf of a credit purchaser) of NPLs originated by EU banks, and the purchase of NPLs originated by EU banks.

In-scope servicers will require authorisation, but in-scope purchasers will not; the Irish credit servicing framework will require some amendments as a result.

The Directive will apply irrespective of the type of borrower, but certain requirements regarding the appointment of credit servicers will only apply where the borrowers are consumers or SMEs.

TIMING

Member States are expected to have 24 months to transpose the Directive into domestic law once it is published in the Official Journal.

IMPACT

From an Irish perspective, it is particularly welcome that in-scope credit purchasers will not need to be regulated as this requirement has been particularly onerous. However, some key issues will need to be worked through, including the categorisation of NPLs, and how sales of combined portfolios by EU banks (comprising NPLs and performing loans) are to be dealt with.  The Directive will apply to post-transposition NPL sales only, so credit servicers and credit purchasers are likely to be dealing with a mixed regime for some time to come.  Please contact any member of our team to discuss the impact of the Directive on your business.