Non-performing loans: agreement reached on EU rules for selling non-performing loans to third parties

European Parliament negotiators agreed with the Council on common European standards regulating the transfer of bad debts from banks to secondary buyers while protecting the rights of borrowers.

Negotiators agreed on harmonized binding provisions for all member states. They have ensured that borrowers are not worse off following the transfer of their credit agreement and member states can maintain or introduce stricter rules to protect consumers.

NPL secondary markets

The measures agreed promote the development of professional secondary markets for credit contracts originally issued by banks and qualified as non-performing. Third parties (credit buyers) could buy such NPLs throughout the EU. Credit buyers (eg investment funds) do not create new credit, but buy existing non-performing loans at their own risk. They therefore do not need special authorization but will have to comply with the borrower protection rules.

Supervised debt collection

Credit managers are legal entities acting on behalf of credit buyers and managing rights and obligations under a non-performing credit agreement, such as the collection of payments or the renegotiation of contract terms. EP negotiators ensured that they should obtain authorization and be subject to control by the competent authorities of the Member States. Member States should also ensure that there is an up-to-date publicly available list or national register of all credit managers. In order to protect consumers, all credit buyers will be required to have a credit manager appointed by a host country for consumer portfolios. In addition, buyers of credit from third countries will also need to appoint a credit manager for SME portfolios in order to protect entrepreneurs.

Protect borrowers

The uniform level of protection for borrowers who cannot pay their debts, agreed upon during negotiations, requires credit buyers and credit managers to provide accurate information, respect and protect the personal information and privacy of borrowers, and refrain from any harassment, coercion or undue influence.

Prior to the first collection of debts, a borrower will also have the right to be informed in a clear and understandable manner on paper or other durable medium of any transfer of the rights of a creditor. The information should include a transfer date, identification, contact details and authorization of a new credit manager or credit service provider, as well as detailed information about the amounts owed by the borrower. In addition, the borrower should be informed of where he can submit complaints.

Esther de Lange (PPE, NL), the co-rapporteur, said: “It is a great relief that we can finally continue the work to solve the challenge of bad loans held by banks. Friday night’s deal can help us prevent the economic downturn during the corona crisis from turning into another banking crisis. This directive will create a European secondary market for problematic loans and at the same time ensure that the people who have taken out these loans are treated fairly.

MEPs assured that borrowers should not be worse off following the transfer of their credit agreement. To this end, the fees and penalties charged by the services, including transfer fees, cannot change and no additional fees can be imposed other than that related to this credit agreement. In addition, the contract and obligations between a credit manager to a credit buyer should not be altered by the outsourcing of credit service.

Irene Tinagli (S&D, IT), President and Co-Rapporteur of ECON, said: “With this directive, we make it clear that the development of a real, efficient and well-regulated European secondary market for NPLs must go hand in hand with all possible efforts on the part of creditors to restore credit performance and the highest possible level of protection for borrowers. This is even more important now that we are still suffering the consequences of the COVID-19 pandemic; we cannot risk the recovery being jeopardized by decisions that penalize households and businesses.

Finally, negotiators agreed to take into account a borrower’s individual situation such as a mortgage tied to a residential property and the ability to repay a loan while deciding on action. These steps may include partial refinancing of a credit agreement, changing the terms of the agreement, extending loan terms, currency conversions, and other means to facilitate repayment. Member States can apply the measures that work best for borrowers under national schemes, but should have an appropriate set of measures at national level.


Addressing any possible future build-up of non-performing loans (NPLs) is essential to strengthen the banking union and ensure competition in the banking sector, as well as to maintain financial stability and encourage banks to lend in order to create jobs. , stimulate growth and support the post-COVID-19 recovery in the EU.

NPLs are generally defined as loans that are either more than 90 days past due or are unlikely to be fully repaid.

Next steps

The Parliament, the Council and the Commission are currently working on the technical aspects of the text. Subsequently, the agreement must be approved by the Committee on Economic and Monetary Affairs and by Parliament as a whole.

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