Bad debt sold. Regulator will analyze complaints

The Bank of Portugal will now receive and analyze complaints from bank customers about companies that buy bad debt sold by banks, a practice that has been common in recent years, the banking supervisor told Lusa.

Lusa asked the Bank of Portugal about the new legal framework for credit assignment – ​​the technical term for the operation in which banks sell credit portfolios (generally non-performing) to other entities – to clarify exactly how it will intervene.

The BdP explained that until now these entities were outside its supervision, but with the entry into force of the new regime, on December 10, it will be responsible for supervising and monitoring the activities carried out by companies that purchase credits from banks and by the entities managing these credits, including to "assess complaints from debtors."

Until the new regime comes into effect, the Bank of Portugal is not responsible for receiving and analyzing complaints from bank customers about the companies that purchase large loan portfolios from banks, nor about the companies subcontracted by these buyers to manage the loans. Therefore, the court becomes the only alternative in the event of a dispute.

In early September, Lusa published a report on the sale of mortgage loans by banks in recent years and how they have left customers who were already struggling to pay for their homes unprotected.

Lusa reported the case of a client who won a lawsuit against BPI (which sold her loan to a company based in Luxembourg), but who continues to fight to this day to avoid losing her home. In less than a year, the Supreme Court of Justice annulled in two similar rulings the sale of home loans carried out by banks, finding the transactions to be “fraud of the law.”

With the regime's entry into force, the BdP "will have the authority, for example, to conduct inspections and assess debtors' complaints," he told Lusa. In the event of non-compliance with the rules, the BdP may issue orders and recommendations and even impose sanctions in administrative offense proceedings.

The BdP also has the power to revoke, in certain situations, the authorization granted to credit managers to operate.

Also under the new law, the central bank will now regularly receive information on credit agreements sold by banks. It will know which banks are selling the loans, the outstanding balances, the number of sales in each period, and the type of loans sold (housing or consumer). These loans will also now be required to be reported to the Credit Liability Center.

So far, the Bank of Portugal has not released data on credit sales made by banks.

Lusa also questioned the BdP about a situation in which a customer with a loan that was sold requests a new loan from another bank. In this case, does the bank granting the new loan know about the previous loan and consider it for that customer's loan burden or not, Lusa asked.

The Bank of Portugal explained that, under current rules, selling a loan to an entity outside its supervision means that the loan disappears from the customer's credit liability map, meaning the bank is unaware of the existence of the loan and the loan "will not be considered in assessing the customer's creditworthiness" (unless the customer provides this information, for example).

Under the new regime, sold credits will now be recorded in the credit responsibility center to which banks have access.