Maria Soares do Lago and Inês Magalhães Correia co-author article on the new non-performing loan regime

Maria Soares do Lago and Inês Magalhães Correia co-authored the article “The new non-performing loan regime enters into force in December: what changes for banks, buyers and debtors?”, published in Advocatus, in which they analyse the amendments introduced by the new legal framework that will come into effect in December and will have a significant impact on banks, buyers and debtors.

The recently published Decree-Law regulates the transfer and management of bank loans, applying both to performing and non-performing loans. It constitutes the transposition into Portugal of a European Directive aimed at harmonising this legal framework across the European Union. The Bank of Portugal will assume supervisory powers over these operations and has already launched a public consultation on a draft notice, open for contributions until 29 October.

One of the core elements of the new regime is the express recognition of the principle of neutrality of transfer, which ensures that debtors cannot be placed in a less favourable legal position simply because their loan has been sold. This measure is particularly relevant in the context of mortgage loans, where court decisions have questioned the validity of transfers that do not respect consumers’ right of redemption.

The new law also introduces restrictions on the buyers authorised to acquire loans: in addition to banks and financial institutions, only credit funds and regulated securitisation entities may acquire loans at any stage of performance. Other investors will be limited to specific circumstances.

Furthermore, buyers will now be required to appoint a loan manager (“servicer”) duly authorised by the Bank of Portugal, which will oversee their activity. These managers will have to meet suitability requirements and will be subject to specific duties towards debtors.

Among the new obligations are information duties imposed on transferring entities, as well as requirements for confidentiality, good faith, the prohibition of harassment or coercion, and respect for the position of debtors, particularly consumers. The aim is to ensure greater protection and balance in these transactions, while promoting a more transparent and competitive secondary credit market, aligned with other EU countries.

Read the full article here.

(the article is in portuguese only)