Decree-Law 103/2025, published on 11 September and entering into force on 10 December 2025, transposes Directive (EU) 2021/2167 (the “Bad Credit Directive”), establishing a legal framework for the assignment of credits granted in Portugal by credit institutions and other authorised entities. It seeks to stimulate the secondary market for non-performing loans while safeguarding debtors’ positions, and also applies to performing credits. Only credit funds and securitisation entities may acquire credits regardless of their performance status, whereas other purchasers are limited to credits overdue for more than 90 days or classified as unlikely to be paid. Assignments are subject to the appointment of an authorised credit manager, notification to the debtor and compliance with information duties, with credit managers requiring authorisation from the Bank of Portugal and being subject to restrictions on holding funds, as well as fit and proper, confidentiality and reporting requirements.
Decree-Law 103/2025 of 11 September, which will enter into force on 10 December 2025 and whose main purpose is to transpose Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021, commonly referred to as the "Bad Credit Directive", was finally published yesterday, 11 September. The stated objectives of this new legal regime are: on the one hand, to develop the secondary market for the sale of non-performing loans, promoting conditions for credit institutions to dispose of such positions in more competitive circumstances and, on the other hand, to ensure that such sales have no impact on the legal position of the debtor, who should not be placed in a less favourable position as a result of the assignment.
Which transactions will have to comply with the new rules?
The new regime applies to the assignment of credits and contractual positions in credit agreements (both defined as assignment) that have been granted in Portugal by the following entities: (i) credit institutions or financial companies, payment institutions or electronic money institutions with headquarters in Portugal, (ii) credit institutions or financial institutions headquartered abroad and established in Portugal through a branch, or (iii) any of the aforementioned entities if, since established in the European Union, they are authorised to grant credit in Portugal under the freedom to provide services.
The following are excluded from the scope of the new rules: assignment transactions in which the purchaser is any of the entities referred to above1, credit management carried out by an institution in relation to the credits it holds or carried out by the management company or self-managed collective investment company (SIC) in relation to the credits held, respectively, by the collective investment undertakings it manages or the SIC itself.
We can therefore conclude that, in Portugal, this regime will apply not only to credit granted by credit institutions, but also to credit granted by other entities entitled to grant credit. It should be noted that, although it is commonly called the "bad credit regime", it applies to both performing and non-performing loans.
Limitations to the pool of purchasers
In addition to the aforementioned entities, only alternative investment undertakings (commonly called credit funds) and securitisation special purpose entities (credit securitisation companies or credit securitisation funds) will now be able to purchase loans in any performance situation and regardless of their classification in terms of probability of performance.
Any other purchasers have limited options and may only acquire credits covered by the new regime (i) for which instalments are overdue and unpaid for more than 90 days or (ii) where the debtor is a small, medium or large company, the credit has been classified as unlikely to be paid2 for at least 12 months.
Obligation to hire a credit manager
Wherever the regime applies3, the assignment takes effect once a qualified credit manager (servicer) has been hired and a notification has been sent to the debtor within 10 days of the assignment (and before the first collection), informing them of the assignment, the identity of the credit manager, and other relevant information.
Position of the originator
Regulation of the seller's debtors
Among the originator's now mandatory duties, we highlight the following: (i) the duty to provide prior information, in a standardised manner, to potential transferees on the subject matter of the assignment based on the data model established in European Union regulations, namely in the context of due diligence; (ii) the periodic duty to inform the Bank of Portugal about the assignments it has made, under the terms provided therein, and (iii) the duty to inform the Credit Responsibility Centre.
Regulation of the purchaser's duties
Where the transferee has no residence, registered office or central administration in the European Union, it is required to appoint a representative in the European Union.
It is also worth highlighting the following duties of transferees: (i) the duty of confidentiality and professional secrecy under the rules laid down for banking secrecy (also applicable to the transferee's employees), (ii) the duty of good faith, loyalty and non-harassment or non-coercion towards debtors, (iii) the duty to provide clear and truthful information, and (iv) the duty to safeguard the personal data and privacy of debtors.
Credit managers (servicers)
The credit management activity covered by the regime may only be carried out by (i) authorised servicers with headquarters in Portugal, (ii) legal persons authorised in another Member State to carry out the activity in Portugal, or (iii) credit institutions, financial companies, payment institutions or electronic money institutions.
Authorisation to carry out credit management activities must be obtained from the Bank of Portugal and is subject, in particular, to a fit and proper persons test.
In transposing the Directive, the Portuguese legislator chose to prohibit the servicer from taking over and holding funds from the debtor. This option is not in line with managers' preference, as it makes it difficult to implement management in practice.
It should be noted that servicers, including members of their management bodies and employees, must comply with all duties and requirements, including duties of diligence, professional secrecy, notification of the assignment, document retention, provision of periodic information and their respective duties towards the debtor.
Outsourcing by servicers is possible provided that it does not cover all the functions and complies with the requirements of the regime.
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2Within the meaning of Article 178 of EU Regulation 575/2013.
3It does not apply, we remind you, to credits assigned to (i) credit institutions or financial companies, payment institutions or electronic money institutions with headquarters in Portugal, (ii) credit institutions or financial institutions headquartered abroad and established in Portugal through a branch, or (iii) any of the aforementioned entities if, since established in the European Union, they are authorised to grant credit in Portugal under the freedom to provide services.
