Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on credit servicers, credit purchasers and the recovery of collateral
Date: 2018-03-14
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU banking union, action programme, banking supervision, capital market, consumer protection, credit, credit institution, credit policy, financial solvency

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   EUROPEAN COMMISSION  Brussels, 14.3.2018 COM(2018) 135 final 2018/0063 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on credit servicers, credit purchasers and the recovery of collateral (Text with EEA relevance) {SWD(2018) 75 final} - {SWD(2018) 76 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

This  proposal  is  an  important  part  of  the  work  to  strengthen  Europe’s  Economic  and 
Monetary Union (EMU). A more integrated financial system will enhance the resilience of the 
EMU to adverse shocks by facilitating private risk-sharing across borders, while at the same 
time  reducing  the  need  for  public  risk-sharing.  In  order  to  achieve  these  objectives,  the  EU 
must  now  complete  the  Banking  Union  and  put  in  place  all  building  blocks  for  a  Capital 
Markets  Union  (CMU).  The  Commission's  Communication  of  11  October  20171  sets  out  a 
way forward to complete the Banking Union by promoting risk reduction and risk sharing in 
parallel, as part of the roadmap to strengthen EMU set out by the Commission on 6 December 
2017.2 

Addressing  high  stocks  of  non-performing  loans  (NPLs)3  and  their  possible  future 
accumulation  is  essential  to  complete  Banking  Union.  This  will  further  reduce  risks  and 
enable  banks  to  focus  on  lending  to  businesses  and  citizens.  NPLs  are  loans  where  the 
borrower  is  unable  to  make  the  scheduled  payments  to  cover  interest  or  capital 
reimbursements. When the payments are more than 90 days past due, or the loan is assessed 
as unlikely to be repaid by the borrower, it is classified as an NPL. The financial crisis and 
subsequent recessions led to a more widespread inability of borrowers to pay back their loans, 
as more companies and citizens faced continued payment difficulties or even bankruptcy. This 
was  particularly  so  in  Member  States  which  faced  protracted  periods  of  recessions.  As  a 
consequence  of  this,  as  well  as  other  factors,  many  banks  saw  a  build-up  of  NPLs  on  their 
books. 

High stocks of NPLs can weigh on bank performance through two main channels. First, NPLs 
generate  less  income  for  a  bank  than  performing  loans  and  thus  reduce  the  bank’s 
profitability,  and  may  cause  losses  that  reduce  its  capital.  In  the  most  severe  cases,  these 
effects  can  put  in  question  the  viability  of  a  bank,  with  potential  implications  for  financial 
stability.  Second,  NPLs  tie  up  significant  amounts  of  a  bank's  resources,  both  human  and 
financial.  This  reduces  the  bank's  capacity  to  lend,  including  to  small  and  medium-sized 
enterprises (SMEs). 

SMEs are particularly affected by the reduced credit supply, as they rely on bank lending to a 
much  greater  extent  than  larger  companies,  thereby  affecting  economic  growth  and  job 
creation.  Bank  lending  is  often  overly  expensive  and  bank  lending  volumes  to  SMEs  have 
been  severely  affected  by  the  2008  financial  crisis,  which  impedes  the  development  and 
growth of SMEs. 

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2 

3 

Communication  to  the  European  Parliament,  the  Council,  the  European  Central  Bank,  the  European 
Economic and Social Committee and the Committee of the Regions on completing the Banking Union, 
COM(2017) 592 final, 11.10.2017. 
Communication from the Commission to the European Parliament, the European Council, the Council 
and  the  European  Central  Bank  -  further  steps  towards  completing  Europe's  economic  and  monetary 
union: a roadmap, COM(2017) 821 final, 06.12.2017. 
NPLs denote loans where the borrower is unable to make the scheduled payments to cover interest or 
capital reimbursements. When the payments are more than 90 days past due, or the loan is assessed as 
unlikely to be repaid by the borrower, it is classified as an NPL. Commission Implementing Regulation 
(EU) 2015/227. 

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Well-developed  secondary  markets  of  NPLs  are  also  one  of  the  building  blocks  for  a  well-
functioning CMU4.  One  of  the  main  objectives  of  the  Commission's  priority  of  establishing 
the CMU is to provide new sources of financing for EU businesses, SMEs and high-growth 
innovative companies in particular. While the CMU project is focused on facilitating access to 
and diversifying non-bank finance for EU businesses, it also acknowledges the important role 
played by banks in financing the EU economy. Therefore, one of the CMU work streams aims 
at  enhancing  banks'  capacity  to  lend  to  businesses,  including  through  strengthening  their 
ability to recover value from collateral provided to secure loans. 

High  levels  of  NPLs  must  be  addressed  by  a  comprehensive  approach.  While  the  primary 
responsibility for tackling high levels of NPLs remains with banks and Member States5, there 
is  also  a  clear  EU  dimension  to  reduce  current  stocks  of  NPLs,  as  well  as  preventing  any 
excessive  build-up  of  NPLs  in  the  future  given  the  interconnectedness  of  the  EU’s  banking 
system and in particular that of the euro area. In particular, there are important potential spill-
over effects from Member States with high NPL levels to the EU economy as a whole, both in 
terms of economic growth and financial stability.  

Reflecting this EU dimension and building on the shared agreement on the need to continue 
and extend the actions already initiated by the Commission, the Council adopted in July 2017 
an  "Action  Plan  To  Tackle  Non-Performing  Loans  in  Europe".  The  Action  Plan  sets  out  a 
comprehensive approach that focus on a mix of complementary policy actions in four areas: 
(i) bank supervision and regulation (ii) reform of restructuring, insolvency and debt recovery 
frameworks,  (iii) developing  secondary  markets  for  distressed  assets,  and  (iv) fostering 
restructuring  of  the  banking  system.  Actions  in  these  areas  are  to  be  taken  at  national  level 
and at Union level where appropriate. Some measures will have a stronger impact on banks' 
risk  assessment  at  loan  origination,  while  others  will  foster  swift  recognition  and  better 
management  of  NPLs,  and  further  measures  will  enhance  the  market  value  of  such  NPLs. 
These  measures  mutually  reinforce  each  other  and  would  not  be  sufficiently  effective  if 
implemented in isolation. 

This  proposal,  together  with  the  other  measures  the  Commission  is  putting  forward  as  a 
comprehensive  package  for  NPLs,  as  well  as  the  action  taken  by  the  Single  Supervisory 
Mechanism (SSM) and the European Banking Authority (EBA) are key parts of this effort. In 
combining  several  complementary  measures,  the  Commission  helps  create  the  appropriate 
environment  for  banks  to  deal  with  NPLs  on  their  balance  sheets,  and  to  reduce  the  risk  of 
future NPL accumulation. 

Banks  will  be  required  to  put  aside  sufficient  resources  when  new  loans  become  non- 
performing,  creating appropriate incentives to address NPLs at an early stage and avoid too 
large accumulation of NPLs. 

If  loans  become  non-performing,  more  efficient  enforcement  mechanisms  for  secured  loans 
will allow banks to address NPLs, subject to appropriate safeguards for debtors. Should NPL 
stocks  nevertheless  become  too  high  –  as  it  is  currently  the  case  for  some  banks  and  some 
Member  States  –  banks  will  be  able  to  sell  them  in  efficient,  competitive  and  transparent 
secondary  markets  to  other  operators.  Supervisors  will  guide  them  in  this,  based  on  their 

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Communication by the European Commission to the European Parliament, the European Council, the 
Council, the European Social and Economic Committee and the Committee of the Regions: Completing 
the Capital Markets Union by 2019 - Time to accelerate delivery, COM(2018) 114. 
The  Commission  has  consistently  mentioned  this  matter,  for  the  Member  States  concerned,  in  the 
context of the European Semester. 

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existing bank-specific, so-called Pillar 2, powers under the Capital Requirements Regulation 
(CRR)6.  Where  NPLs  have  become  a  significant  and  broad-based  problem,  Member  States 
can set up national asset management companies or other measures within the framework of 
current state aid and banks resolution rules. 

This proposal will prevent excessive future build-up of NPLs on banks' balance sheets in two 
ways.  

First,  the  proposal  will  help  banks  to  better  manage  NPLs  by  increasing  the  efficiency  of 
debt  recovery  procedures  through  the  availability  of  a  distinct  common  accelerated 
extrajudicial  collateral  enforcement  procedure  (AECE).  In  the  majority  of  cases,  banks 
address  their  NPLs  themselves  by  recovering  value  through  work-out.  A  large  share  of  the 
loans that become  NPLs  are loans secured by collateral. While banks  can  enforce  collateral 
under national insolvency and debt recovery frameworks, the process can often be slow and 
unpredictable.  In  the  meantime,  NPLs  remain  on  banks'  balance  sheets,  keeping  the  bank 
exposed  to  prolonged  uncertainty  and  tying  up  its  resources.  This  prevents  the  bank  from 
focusing on new lending to viable customers. Therefore, the proposal makes available more 
efficient methods to banks and other authorised entities to issue secured loans to recover their 
money  from  secured  loans  to  business  borrowers,  out  of  court.  This  more  efficient  extra-
judicial  procedure  would  be  accessible  when  agreed  upon  in  advance  by  both  lender  and 
borrower, in the loan agreement. It will not be applicable for consumer credits and is designed 
so as to  not affect preventive restructuring  or insolvency proceedings and not to change  the 
hierarchy  of  creditors  in  insolvency.  Restructuring  and  insolvency  proceedings  prevail  over 
the accelerated extrajudicial collateral enforcement procedure set out with this proposal. 

Second,  the  proposal  will  encourage  the  development  of  secondary  markets  for  NPLs. 
Under  some  circumstances,  banks  may  be  unable  to  manage  their  NPLs  in  an  effective  or 
efficient  manner.  Banks  will  in  these  cases  recover  less  value  from  their  loans  than  would 
otherwise be possible. This situation may occur, for example, when banks face a large build-
up  of  NPLs  and  lack  the  staff  or  expertise  to  properly  service  their  NPLs.  Banks  may  also 
struggle  to  manage  a  portfolio  of  NPLs  where  the  nature  of  the  loans  falls  outside  of  the 
bank's  core  expertise  to  recover.  In  these  if,  the  best  option  may  be  to  either  outsource  the 
servicing  of  these  loans  to  a  specialised  credit  servicer  or  sell  the  credit  agreement  to  a 
purchaser that has the  necessary risk appetite and expertise to  manage it. For these reasons, 
this  proposal  removes  undue  impediments  to  credit  servicing  by  third  parties  and  to  the 
transfer of credits in order to further develop secondary markets for NPLs. The current diverse 
legislative  framework  for  NPLs  in  the  Member  States  has  hindered  the  emergence  of  an 
effective secondary market for NPLs. The proposal creates a common set of rules that third 
party credit servicers need to abide by in order to operate within the Union. The proposal sets 
common  standards  to  ensure  their  proper  conduct  and  supervision  across  the  Union,  while 
allowing  greater  competition  among  servicers  in  harmonising  the  market  access  across 
Member States. This will lower the cost of entry for potential loan purchasers by increasing 
the  accessibility  and  reducing  the  costs  of  credit  servicing.  More  purchasers  on  the  market 
should, everything else being equal, ease the way for a more competitive market with a larger 
number of buyers, leading to higher demand and higher transaction prices.  

This proposal is complementary to a number of other measures presented today as set out in 
the Commission Communication "Second Progress report on the reduction in Non-Performing 

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Regulation  (EU)  No 575/2013  of  the  European  Parliament  and  of  the  Council  of  26 June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU) 
No 648/2012, OJ L 176, 27.6.2013, pp. 1–337. 

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Loans  in  Europe"7.  In  order  to  prevent  the  risk  of  under-provisioning  of  future  NPLs,  the 
Commission  also  issues  a  separate  proposal  as  regards  deductions  in  relation  to  insufficient 
provisioning for non-performing exposures that amends the Capital Requirements Regulation 
(CRR)8.  The  amendment  introduces  so-called  statutory  prudential  backstops  that  amount  to 
minimum levels of provisions and deductions from own funds that banks will be required to 
make in order to cover incurred and expected losses on newly originated loans that later turn 
non-performing. As further part of the NPL package,  Member States are also provided with 
non-binding guidance on how they can set up, where appropriate, national asset management 
companies  (AMCs)  in  full  compliance  with  EU  banking  and  State  aid  rules.  The  AMC 
Blueprint  provides  practical  recommendations  for  the  design  and  set-up  of  AMCs  at  the 
national level, building on best practices from past experiences in Member States9. 

These initiatives mutually reinforce each other. The statutory prudential backstops ensure that 
credit losses on future NPLs are sufficiently covered, making their resolution or sale easier. 
The AMC blueprint assists Member States that so wish in the restructuring of their banks by 
means of the establishment of asset management companies dealing with NPLs. These effects 
are complemented by the push to further develop secondary markets for NPLs as these would 
make  demand  for  NPLs  more  competitive  and  raise  their  market  value.  Furthermore, 
accelerated  collateral  enforcement  as  a  swift  mechanism  for  recovery  of  collateral  value 
reduces  the  costs  for  resolving  NPLs.  At  the  same  time,  the  proposal  does  not  affect  the 
numerous safeguards for borrowers available under EU and national legislation. It introduces 
a number of additional safeguards, in order to limit potential risks from the sale of consumer 
loans and performing credits. 

• 

Consistency with existing policy provisions in the policy area 

This  proposal  standardises  the  regulatory  regime  (definition,  authorisation,  supervision, 
conduct  rules)  for  credit  servicers  and  credit  purchasers.  Currently,  differences  in  national 
legislation and implementation across Member States have led to a large  variety of business 
models and unequal volume of activity across Member States and thus contributed to a very 
limited number of NPLs sales in some Member States with high NPL ratios. By consequence, 
credit  institutions  wishing  to  dispose  of  credit  portfolios  containing  NPLs  face  an  investor 
base  fragmented  along  national  borders,  and  credit  servicers  face  significant  difficulties  in 
servicing credits involving cross-border dimension (in particular cross-border collection) and 
also have limited scope to realise scale economies from cross-border activity. 

This proposal is consistent with Article 169 of the Treaty on the Functioning of the European 
Union  (TFEU),  secondary  legislation  and  Union  rules  aimed  at  ensuring  a  high  level  of 
consumer protection, in the area of financial services. To this end, the proposal will establish 
that consumer protection rules would continue to apply in order to ensure the same level of 
protection, irrespective of who owns or services the credit and irrespective of the legal regime 
in  force  in  the  Member  State  of  the  credit  purchaser  or  the  credit  servicer.  The  proposal 
clarifies that consumer protection and in particular the rights granted to consumers under the 
Mortgage Credit Directive10 and the Consumer Credit Directive11 and the Unfair Contractual 

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Communication from the Commission to the European Parliament, the European Council, the Council 
and  the  European  Central  Bank  -  second progress report on  the reduction  of non-performing  loans in 
Europe, COM(2018) 133 
Regulation (EU) No 575/2013, ibidem. 
Commission Staff Working Document AMC Blueprint, SWD(2018) 72. 
Directive  2014/17/EU  of  the  European  Parliament  and  of  the  Council  of  4 February  2014  on  credit 
agreements  for  consumers  relating  to  residential  immovable  property  and  amending  Directives 
2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010  (OJ L 60, 28.2.2014, p. 34) 

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Terms Directive12 in relation to a credit granted by a credit institution will continue to apply 
irrespective  of  who  subsequently  purchases  or  services  the  credit.  In  addition,  similar  to 
Article 17 of the Consumer Credit Directive, in the event of assignment of the creditor's rights 
to  a  third  party,  the  Mortgage  Credit  Directive  will  be  amended  to  state  that  the  consumer 
shall be entitled to plead against the assignee any defence which was available to him against 
the original creditor.  

This  proposal  is  also  consistent  with  the  Financial  Collateral  Directive  (FCD)13,  which 
introduced a European regime for the provision and enforcement of collateral under the form 
of  securities,  cash  and  credit  claims.  The  accelerated  extrajudicial  collateral  enforcement 
procedure set out in this proposal would not interfere with the collateral governed by the FCD 
because it would regulate the enforcement of other types of collateral than the ones within the 
scope  of  the  Financial  Collateral  Directive.  Concretely,  this  proposal  would  make  available 
effective out-of-court procedures for the enforcement of collateral under the form of movable 
and immovable assets which is provided by companies and entrepreneurs to secure loans, but 
matters governed by the FCD will not be affected by this proposal.  

This  initiative  would  also  ensure  full  consistency  with  pre-insolvency  and  insolvency 
proceedings initiated under Member States' national laws and regulations. Consistency would 
be ensured through the principle that the extrajudicial enforcement of collateral set out in this 
proposal would be possible as long as a stay of individual enforcement actions, in accordance 
with applicable national laws, is not applicable.  

Moreover,  this  proposal  would  ensure  full  consistency  and  complementarity  with  the 
Commission  proposal  on  preventive  restructuring  frameworks14  (Restructuring  Proposal) 
which  proposed  measures  to  enhance  the  effectiveness  of  restructuring  and  insolvency 
proceedings and to ensure the availability of preventive restructuring procedures so that viable 
companies in financial difficulties may avoid insolvency. While the Restructuring Proposal15 
aims at establishing a harmonised judicial framework on preventive restructuring and second 
chance for companies and entrepreneurs, this proposal aims at enhancing the effectiveness of 
out-of-court  enforcement  procedures  for  collateral.  In  order  to  ensure  full  consistency  and 
complementarity with the Restructuring Proposal, the extrajudicial enforcement of collateral 
as  set  out  in  this  proposal  would  be  possible  as  long  as  a  stay  of  individual  enforcement 
actions,  in  accordance  with  the  Restructuring  Proposal,  is  not  applicable.  The  Restructuring 
Proposal foresees that creditors, including secured creditors of a company or entrepreneur that 
is  subject  to  restructuring  proceedings,  are  subject  to  the  stay  of  individual  enforcement 
actions in order to enable the debtor to negotiate a restructuring plan with creditors and avoid 
insolvency. 

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Directive  2008/48/EC  of  the  European  Parliament  and  of  the  Council  of  23 April  2008  on  credit 
agreements for consumers and repealing Council Directive 87/102/EEC, OJ L 133, 22.5.2008, p. 66–92. 
Council  Directive  93/13/EEC  of  5  April  1993  on  unfair  terms  in  consumer  contracts,  OJ  L  95, 
21.4.1993, p. 29–34. 
Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2002  on  financial 
collateral arrangements (http://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32002l0047). 
Proposal  for  a  Directive  European  Parliament  and  of  the  Council  on  preventive  restructuring 
frameworks,  second  chance  and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and 
discharge procedures and amending Directive 2012/30/EU, COM/2016/0723 final, 22.11.2016. 
Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  preventive  restructuring 
frameworks,  second  chance  and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and 
discharge procedures and amending Directive 2012/30/EU, COM/2016/0723 final, 22.11.2016 

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• 

Consistency with other Union policies 

More than five years after the European Heads of State and Governments agreed to create a 
Banking Union, two pillars of the Banking Union – single supervision and resolution – are in 
place,  resting  on  the  solid  foundation  of  a  single  rulebook  for  all  EU  institutions.  While 
important progress has been made, further steps are needed to complete the Banking Union, 
including  the  creation  of  a  single  deposit  guarantee  scheme,  as  set  out  in  the  Commission 
Communication of 17 October 2017 and in the Roadmap presented on 6 December, as part of 
the package on deepening Economic and Monetary Union. 

In  addition  to  the  comprehensive  package  of  reforms  proposed  by  the  Commission  in 
November  2016  ("Banking  reform  package"),  the  development  of  a  secondary  market  for 
loans and the provision of enhanced protection of secured creditors are part of risk reducing 
measures  that  are  needed  to  further  strengthen  resilience  of  the  banking  sector  and  that  are 
parallel to the staged introduction of the European Deposit Insurance Scheme (EDIS). These 
measures aim at the same time to ensure a continued single rulebook for all EU institutions, 
whether  inside  or  outside  the  Banking  Union.  The  overall  objectives  of  this  initiative,  as 
described  above,  are  fully  consistent  and  coherent  with  the  EU's  fundamental  goals  of 
promoting financial stability, reducing the likelihood and the extent of taxpayers' support in 
case  an  institution  is  resolved  as  well  as  contributing  to  a  harmonious  and  sustainable 
financing  of  economic  activity,  which  is  conducive  to  a  high  level  of  competitiveness  and 
consumer protection. 

This  initiative  has  been  announced  in  the  Communication  on  the  Mid-term  review  of  the 
Action Plan on Building a Capital Markets Union16. That Communication stressed that capital 
markets  can  also  help  European  banks  to  overcome  the  challenges  of  NPLs.  It  stressed  that 
policies that aim to improve the functioning of secondary markets for NPLs are a key part of 
any  durable  solution,  and  that  the  management  of  NPLs  would  also  benefit  from  more 
efficient  and  more  predictable  loan enforcement  frameworks  designed  to  enable  swift  value 
recovery by secured creditors. 

One of the objectives of this proposal is to enhance the ability of secured creditors to recover 
value  from  collateral  in  a  swifter  manner  through  extrajudicial  enforcement  procedures  for 
collateral. By enabling secured creditors, including banks, to obtain value from collateral in a 
swifter  manner,  this  proposal  would  contribute  to  facilitating  more  bank  lending  to  the 
economy,  SMEs  in  particular,  and  at  lower  price,  in  line  with  the  CMU's  objective  of 
facilitating access to finance for companies. 

The  provisions  on  loan  servicers  and  purchasers  would  ensure  more  predictability  and 
transparency in secondary markets for NPLs, which in turn would allow potential purchasers 
to more accurately price those assets. This would allow banks to sell their NPLs to a larger 
pool  of  investors  potentially  leading  to  transaction  prices  that  better  reflect  the  underlying 
value of the assets. This in turn would lead to cleaned-up balance sheets and credit institutions 
better prepared to provide new credit flow to the economy. 

Addressing the remaining risks  in  the European banking  sector is of great importance  to  its 
functioning and stability and thereby to the wider economy. In particular, there are important 
potential  spill-over  effects  from  Member  States  with  high  levels  of  NPLs  to  other  EU 

Communication from the Commission to the European Parliament, the Council, the European 

16 
Economic and Social Committee and the Committee of the Regions on the Mid-Term Review of the Capital 
Markets Union Action Plan, COM(2017) 292 final, 8.6.2017. 

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economies  and  the  EU  at  large,  both  in  terms  of  economic  growth  and  financial  stability. 
in 
Segmented  NPL  markets  along  national  boundaries 
authorisation  regimes  would  not  be  consistent  with  the  objective  of  the  Capital  Markets 
Union.  

through  strong  differences 

This initiative is without prejudice to the safeguards in place for consumer, including in the 
case  the  original  creditor  is  replaced  by  a  non-credit  institution.  EU  legislation  already 
includes a number of measures on consumer protection. The proposal provides that both the 
credit  purchasers  and  credit  servicers  will  have  to  comply  with  Union  law  in  respect  of 
consumer  protection  applicable  to  the  initial  credit  agreement.  In  the  same  way,  all  the 
consumer  protection  rules  in  force  in  the  Member  State  of  the  consumer,  either  stemming 
directly from the initial credit  contract or  from  other  rules applicable  to credits delivered to 
consumers or related to the general consumer protection rules in force in the Member State of 
the consumer, will continue to apply. 

The  above  mentioned  safeguards  also  include  the  measures  of  mandatory  or  voluntary 
character  provided  for  the  protection  of  consumers  in  the  Member  State  of  their  habitual 
residence, in particular the formal or informal debt-recovery procedures put in place by public 
or  private  bodies  providing  debt-advice  to  over-indebted  households,  aimed  to  their  debt-
recovery. Furthermore, as regards the exercise of credit servicing activities in the cross-border 
context, this instrument shall be without prejudice to EU harmonised rules which determine 
the  applicable  law,  applicable  jurisdiction  and  recognition  and  enforcement  of  judgments  in 
civil and commercial matters including in insolvency proceedings.  

Borrower rights, personal data protection rights and national civil law provisions that govern 
the  assignment  of  contracts  are  not  within  the  scope  of  this  proposal.  The  processing  of 
personal  data  in  the  context  of  this  Directive  must  fully  comply  with  the  rules  on  personal 
data protection. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article  114  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  confers  the 
European  Parliament  and  the  Council  the  competence  to  adopt  measures  for  the 
approximation  of  the  provisions  laid  down  by  law,  regulation  or  administrative  action  in 
Member  States  which  have  as  their  object  the  establishment  and  functioning  of  the  internal 
market.  Article  114  TFEU  allows  the  EU  to  take  measures  not  only  to  eliminate  current 
obstacles  to  the  establishment  and  functioning  of  the  internal  market,  but  also  to  address 
barriers  that  dissuade  economic  operators  from  taking  full  advantage  of  the  benefits  of  that 
market in particular investing in other Member States. Moreover, Article 53 of the Treaty on 
the  Functioning  of  the  European  Union  (TFEU)  confers  the  European  Parliament  and  the 
Council  the  competence  to  adopt  Directives  for  the  coordination  of  national  provisions 
concerning economic activities.  

Currently,  credit  purchasers  and  credit  servicers  cannot  reap  the  benefits  of  the  internal 
market due to barriers erected by divergent national legislations in the absence of a dedicated 
and coherent regulatory and supervisory regime. 

Non-bank  purchasers  of  credit  granted  by  credit  institutions  are  not  regulated  in  some 
Member States, while in others they can face various requirements, sometimes amounting to 
full banking licences. In practice, this has led to a situation where the purchasers can legally 

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operate in one Member State but face considerable obstacles to purchasing credits in others. 
This  is  one  reason  why  purchasers  mostly  operate  in  a  limited  number  of  Member  States, 
which  resulted  in  an  overall  limited  competition  in  the  internal  market  as  the  number  of 
interested purchasers remains quite low, thus reducing the scope for and potential size of  an 
efficient  and  competitive  NPL  market.  Markets  for  NPLs  in  particular,  tend  to  be 
characterised by comparatively small trade volumes, a  strong clustering in  four countries of 
which only one is a smaller Member State (Italy, Ireland, Spain and the UK). These markets 
also tend to be dominated by large buyers, which can be explained to a certain extent by the 
high barriers in place which prevent entry and distort competition.  

Credit servicers also face barriers to expand cross-border and scale up their activities. Firstly, 
only some Member States regulate the activity, and, those that do, define very differently the 
activities covered. This in practice poses a barrier to the development of expansion strategies 
through secondary establishment or cross-border provision of services in the internal market. 
Secondly,  a  considerable  number  of  Member  States  requires  authorisations  for  some  of  the 
activities 
impose  different 
requirements and do not provide for possibilities of cross-border scaling up. Finally, in some 
cases, local establishment is required by law, which in itself makes impossible the exercise of 
the fundamental freedom to provide cross-border services. 

these  credit  servicers  engage.  These  authorisations 

that 

Moreover, the barriers preventing the credit servicers from operating cross-border indirectly 
affect the potential purchasers, who might not be able to enter a national market and purchase 
credits  from  credit  institutions,  if  they  cannot  then  outsource  the  servicing  to  other  entities 
than  the  bank  from  whom  they  acquired  the  credit  agreement  or  use  the  services  of  credit 
servicers from other EU Member States.  

The large differences in regulatory standards adopted by Member States contribute to market 
fragmentation,  which  restricts  the  free  flow  of  capital  and  services  within  the  EU,  leads  to 
insufficient competition and slows down the development of a functioning secondary market 
for  bank  credits.  Limited  participation  of  investors  and  servicers  implies  weak  competitive 
pressure on both markets (the one for purchasing and the one for credit servicing). It results in 
high fees credit servicing firms charge to purchasers for their services and low prices banks 
can  realise  if  they  sell  NPLs  to  non-bank  investors,  which  reduces  incentives  for  banks  to 
offload their high stock of NPLs. 

Creditors  who  grant  secured  loans  to  companies  and  entrepreneurs  do  not  benefit  in  all 
Member States from expedited and effective procedures to enforce such loans out-of-court in 
case  of  business  borrower's  default.  Should  such  procedures  be  available,  the  risk  of  banks 
accumulating NPLs would decrease.  

In order to recover value from collateral posed by a borrower in a different Member State, the 
creditor has to follow rules which are different from the rules of the creditor's home Member 
State, and the efficiency of which is unknown to the creditor. The  creditor cannot presently 
choose  to  agree  with  the  borrower  a  procedure  common  to  all  Member  States.  This  creates 
costs  with  legal  advice  and  can  mean  longer  duration  of  recovery  procedures,  and  lower 
recovery rates. The prospect of recovering less, or at  worst, nothing, from a secured loan in 
case of debtor default can deter lenders from lending cross-border in the first place, or it can 
increase the price of lending for companies. This in turn constitutes a deterrent for borrowers 
for  turning  to  creditors  in  different  Member  States.  This  obstructs  the  free  movement  of 
capital  and  has  a  direct  effect  on  the  functioning  of  the  single  market.    There  is  untapped 

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CMU potential in terms of making funding available to companies, SMEs in particular, which 
are highly reliant on bank lending. 

Similarly,  investors  considering  to  buy  portfolios  of  non-performing  loans  will  take  into 
consideration  potential  legal  uncertainties  in  value  recovery  from  the  collateral  attached  to 
these  loans,  and  if  value  recovery  cross-border  is  more  difficult  or  comes  with  legal 
uncertainties, this will negatively impact the price, and by consequence, the chance of banks 
to sell portfolios also to investors from a different Member State as close as possible to the 
price determined by banks' provision for those loans17. 

The  current  fragmentation  translated  in  different  degrees  of  funding  opportunities  for 
companies, as bank loans are less available to companies, SMEs in particular, in the Member 
States without efficient procedures for recovering value from secured loans. 

Establishing  a  framework  on  efficient  out-of-court  collateral  enforcement  procedures  would 
ensure that secured creditors in  all Member States  benefit from the availability of a distinct 
common expedited tool to recover value from a secured loan in case a business borrower does 
not repay the loan. This should create incentives for more cross-border lending by reducing 
uncertainty  about  the  outcomes  of  enforcement  proceeding  (e.g.  recovery  rate  and  time)  in 
cross-border transactions. 

• 

Subsidiarity (for non-exclusive competence)  

Under Article 4 TFEU, EU action for completing the internal market must be appraised in the 
light  of  the  subsidiarity  principle  set  out  in  Article  5(3)  of  the  Treaty  on  European  Union 
(TEU). It must be assessed whether the objectives of the proposal could not be achieved by 
the  Member  States  in  the  framework  of  their  national  legal  systems  and,  by  reason  of  their 
scale and effects, are better achieved at EU level.  

Since  the  financial  crisis  of  2008,  the  until  recently  rising  stock  of  NPLs  has  deteriorated 
market perceptions of the European banking sector as a whole and has represented negative 
externalities for the whole EU. These factors have become even more relevant in the context 
of the Banking Union. A few Member States have actively acted to address the high stock of 
NPLs  in  recent  years,  in  most  cases  fostered  through  an  EU/IMF  economic  adjustment 
programme. 

Even though Member States have recognised the seriousness of the NPL problem, most have 
failed so far from taking effective measures to address the 'demand' side of the NPL transfers. 
Those that did regulate the activities of credit purchasing and servicing have done so without 
providing for cross-border situations. This has led to insufficient market competition. Varying 
approaches  taken  by  the  Member  States  and  their  different  interpretations  in  particular  of 
credit  servicing  activities  have  been  fragmenting  these  markets.  Therefore,  the  objectives 
cannot be reached through individual action by the Member States.  

The Commission Services have been monitoring the market for a number of years and have 
recognised  increasing  divergence  and  amplification  of  problems  that  warrant  EU-level 
intervention.  Evidence  collected  through  studies  and  public  consultations  has  shown  that  a 
recovery  in  economic  growth  has  not  been  sufficient  to  reduce  NPL  stocks  as  the  latter  are 
weighing on banks' soundness, their credit provision and overall economic growth prospects. 

17 

If a bank has provisioned 30% of an NPL and disposes it subsequently at a price lower than 70%% of 
the value, this will result in a further loss for the bank. 

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There  is  no  coordination  effort  undertaken  so  far  among  Member  States  on  rules  for  bank 
credit  purchasers  and  servicers.  Action  taken  by  the  Member  States  can  only  remedy  their 
own national market conditions, which would not be sufficient to reduce the negative impact 
on the functioning of the Single Market. 

Providing  an  EU-level  framework  would  ensure  uniform  entry  conditions  for  credit 
purchasers and servicers and a passport for carrying out their activities throughout the Single 
Market.  This  would  result  in  particular  for  more  competition  between  potential  investors  in 
bank loans and would allow banks to sell them at more competitive prices. In turn, this would 
allow  the  banks  to  reduce  exposure  to  loans  that  have  become  non-performing  and  redirect 
resources towards new lending to the economy. At the same time, the safeguards provided for 
consumers would ensure that, in the entire Union, the level of consumer protection would be 
maintained  when  consumer  loans  originally  granted  by  credit  institutions  are  sold  and 
serviced. 

Similarly,  Member  States  which  have  already  put  in  place  extrajudicial  enforcement 
procedures  have  established  domestic  rules  on  grounds  related  primarily  to  domestic 
considerations.  In  some  cases,  the  extrajudicial  enforcement  procedures  for  collateral  have 
been established for a long time and do not necessarily incentivise cross-border transactions. 
Given  the  differences  in  the  efficiency  of  existing  national  procedures  and  the  lack  of  such 
procedures in some Member States, the objective is to make available effective such systems 
across the EU, and to ensure that banks or other undertakings authorised to grant credit in all 
Member  States  may  use  such  a  procedure.  Given  the  inherent  links  between  collateral 
enforcement and Member States' civil, property, commercial, pre-insolvency, insolvency and 
public laws, the envisaged rules on this distinct common extrajudicial collateral enforcement 
mechanism  would need to  be able to be implemented in  a way that is consistent with  those 
Member  States'  laws.  The  provisions  below  therefore  establish  a  supplementary  common 
mechanism which does not require Member States to interfere with their national extrajudicial 
enforcement  systems  where  those  exist  for  the  type  of  collateral  covered  in  the  proposal. 
AECE  is  designed  as  a  distinct  mechanism  to  ensure  that  an  extrajudicial  enforcement 
mechanism  may  be  contractually  agreed  upon  between  creditor  and  business  borrower  for 
movable and immovable assets posed as collateral. 

Reaching these objectives can be better achieved at EU level. 

• 

Proportionality 

Under the principle of proportionality, the content and form of EU action should not exceed 
what is necessary to achieve the objectives of the Treaties.  

This  proposal  does  not  go  beyond  what  is  necessary  to  encourage  market  entry  and  cross-
border development, as it is without prejudice to national law provisions on the actual transfer 
of  the  creditor's  rights,  or  to  any  applicable  rules  on  preventive  restructuring  or  insolvency 
proceedings. 

The provisions below establish a regulatory system that is proportionate in terms of creating 
conditions  sufficiently  binding  to  be  effective  in  accomplishing  the  objectives  while  at  the 
same time allow Member States the maximum flexibility to maintain national provisions that 
protect borrowers' rights and defences. 

Moreover,  while  not  affecting  existing  consumer  protection  rules,  the  proposal  takes  into 
account the need for increased safeguards when consumer credits are concerned. Recognising 

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these legitimate concerns, the proposal introduces a requirement that third-country purchasers 
of  consumer  loans  use  the  services  of  authorised  credit  servicers,  which  are  subject  to  the 
requirements of this directive and which are subject to supervision in the EU by the national 
competent  authorities.  Similarly, 
the  envisaged  accelerated  extrajudicial  collateral 
enforcement mechanism seeks to balance the interests of creditor and business borrower. It is 
not available for enforcement of loans granted to consumers, and even for business owners, 
would  not  be  available  to  enforce  collateral  which  consists  in  the  first  residence  of  the 
business borrower. Where the business borrower has paid off the major part (85%) of the sum 
outstanding under the credit agreement already, he would have to be given additional time to 
effect payment before collateral could be enforced. 

The  legal  instrument  chosen,  a  Directive,  is  tailored  to  achieve  the  objectives  of  ensuring  a 
level  playing  field  between  secured  creditors  as  regards  their  ability  to  agree  with  the 
borrower on an  extrajudicial procedure to recover value from collateral in  order to preserve 
financial stability and increase funding opportunities for companies.  

• 

Choice of the instrument 

A  Directive  is  chosen  to  ensure  that  its  provisions  can  be  transposed  by  Member  States 
consistent  with  existing  private  and  public  laws  given  the  multiple  links  with  civil, 
commercial, property and insolvency laws. Article 53 TFEU, which is one of the legal basis 
of this proposal provides only for the adoption of a Directive. 

Moreover, seeing the need to ensure administrative cooperation while allowing the diversity 
of  supervisory  choices  currently  existing  in  the  Member  States  in  respect  of  the  activities 
covered by this proposal, a directive seems to be the appropriate choice of instrument. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

Ex-post-fitness  checks  do  not  apply  because  this  area  was  previously  only  regulated  at 
national level,  

• 

Stakeholder consultations 

The Commission services have carried out a dedicated public consultation on Development of 
secondary  markets  for  non-performing  loans  and  protection  of  secured  creditors  from 
borrowers' default18. Responses to that public consultation have provided qualitative evidence 
to support development of an impact assessment.  

The proposal reflects strongly the feedback gathered from the consultation.  

The  proposal  also  reflects  the  feedback  received  from  the  expert  group  consulted  by  the 
Commission  services  as  regards  Accelerated  Extrajudicial  Collateral  Enforcement.  The 
proposal is a more proportionate approach to achieving the policy objective as compared to a 
full harmonisation through the creation of a new security right, as originally foreseen in the 
public consultation. 

18 

https://ec.europa.eu/info/sites/info/files/2017-non-performing-loans-consultation-document_en.pdf. 

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The dominant majority of the replies to the public consultation as regards secondary markets 
for NPLs affirms that the current size, liquidity and structure of the markets in the EU are an 
obstacle to the management and resolution of NPLs in the EU.  

For  a  clear  majority  of  those  respondents  that  give  a  view,  differences  in  national  rules 
pertaining  to  NPL  sales  are  an  effective  obstacle  to  the  development  of  NPL  markets.  As 
regards  the  nature  of  obstacles  for  cross-border  activity,  the  dominant  number  of  responses 
refers to the legal framework, insolvency rules and local practices. Some stakeholders call for 
additional  rules  to  safeguard  consumer/debtor  protection  while  other  stakeholders  think 
current rules are sufficient and should be maintained. A substantial majority supports an EU 
framework for loan servicers. Almost all respondents that support an EU framework for loan 
servicers advocate that it should cover a licensing regime and about half of them propose that 
it regulates the supervision of loan servicers. 

• 

Collection and use of expertise 

The  proposal  draws  on  an  extensive  amount  of  research,  external  studies,  targeted 
consultations, interviews and other sources.  

Different European and international organisations published analytical reports that build on 
research workshops and consultations with stakeholders (ESRB, EBA, SSM, ECB and IMF). 
Commission services could in particular build on the report of a dedicated sub-group on Non-
Performing  Loans of the Council's Financial Services Committee, as well as on research by 
consultancies,  academics  and  think  tanks.  An  expert  group  with  Member  States  and  EU 
institutions was set up in mid-2017 to follow up on the Council's Action Plan. 

The proposal also draws on targeted requests for information to Member States' ministries of 
Justice  and  legal  experts,  and  several  meetings  with  national  experts  from  Member  States. 
Collection  of  information  also  included  meetings  with  stakeholders  and  academic  research 
papers. 

• 

Impact assessment 

The main economic and social impacts have been examined in two impact assessments which 
accompany this proposal. 

The first impact assessment investigated the situation of credit purchasers and credit servicers. 
It describes the baseline scenario and compares it with three possible options for the reduction 
of  entry  barriers  for  loan  purchasers  and  loan  servicer.  The  baseline  takes  into  account  that 
specific entry barriers in some Member States would continue to exist and conduct rules that 
discourage investor entry and the build-up of investor relationship with loan servicers would 
remain effective. Based on the range of rules applied in the Member States and a discussion of 
best  regulatory  practices,  three  options  were  designed  to  facilitate  and  harmonise  market 
entry, either using non-binding high-level common principles that target the most significant 
barriers,  binding  common  standards  that  allow  cross-border  activity  through  passports  or  a 
binding  single  rulebook  with  passports.  Following  the  analysis  made  in  the  impact 
assessment, the latter two options are equally efficient and among them the option of binding 
common  standards  was  assessed  as  more  proportionate  to  accomplish  the  objective,  also  in 
light  of  very  different  provisions  as  regards  credit  transfers  and  borrower  rights  in  the 
Member States that may require room for national discretion. 

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The  impact  assessment  was  submitted  to  the  Regulatory  Scrutiny  Board  ("RSB")  on  8 
December  201719.  The  RSB  gave  a  negative  opinion  on  the  impact  assessment  and  made  a 
number  of  recommendations  for  improvements.  The  document  was  revised  accordingly  and 
resubmitted  on  29  January  2018.  On  13  February  2018,  the  RSB  provided  a  positive 
opinion20. 

The  key  changes  introduced  in  the  impact  assessment  to  take  into  consideration  the  RSB's 
comments were the following: 

A  new  introduction  common  to  all  three  legislative  initiatives  on  NPL  was  introduced.  It 
explains the NPL issue in a wider context and elaborates on the linkages between the various 
initiatives in the NPL Action Plan in greater detail. 
Differences in borrower rights were introduced as problem drivers as well as discussions how 
they interact with changes in the authorisation regime for NPL investors and loan servicers. 
This was also taken up in the discussion on the general impact of the initiative. 
The concrete provisions were further specified, including a description of the potential range 
of these provisions and a discussion of best practices and how they could be combined to a 
consistent regulatory regime. It was clarified that loan sales include both performing and non-
performing loans. 

Following  up  on  recommendations  to  the  second  RSB  opinion,  the  following  changes  were 
introduced: 

The  set  of  preferred  options  was  narrowed  and  the  link  to  concrete  provisions  this  entails 
described in more detail.  

The  set  of  monitoring  indicators  was  expanded  to  cover  also  conduct  of  loan  servicers  and 
NPL purchasers with respect to borrower rights and supervisors. 

The second impact assessment dealt with the accelerated extrajudicial collateral enforcement. 
It  identified  and  examined  four  policy  options21.  The  first  option  referred  to  possible  non-
regulatory  action  based  on  existing  international  harmonisation  initiatives  of  extrajudicial 
collateral  enforcement  procedures  whereby  the  Commission  would  recommend  Member 
States  to  put  in  place  such  procedures.  The  second  and  preferred  option  explored  the 
possibility and merits of establishing a minimum harmonisation of an extrajudicial collateral 
enforcement procedure across the EU so that banks in all Member States have at their disposal 
an  efficient  procedure  for  extrajudicial  collateral  enforcement.  The  third  option  looked  into 
the  case  for  creating  of  a  new  security  together  with  a  fully  harmonised  extrajudicial 
enforcement  procedure.  The  fourth  option  which  has  been  discarded  at  an  early  stage 
considered establishing a Union out-of-court enforcement mechanism through an alternative 
regime. 

19 

20 

21 

Commission Staff Working Document Impact Assessment The development of secondary markets for 
non-performing  loans  by  removing  undue  impediments  to  loan  servicing  by  third  parties  and  the 
transfer of loans  and Accelerated Extrajudicial Collateral Enforcement (Part 1 / 2). SWD (2018) 75. 
Regulatory  Scrutiny  Board,  Opinion:  Impact  Assessment  /  Development  of  secondary  markets  for 
NPLs, Ares(2018)827204 - 13/02/2018. 
Commission Staff Working Document Impact Assessment The development of secondary markets for 
non-performing  loans  by  removing  undue  impediments  to  loan  servicing  by  third  parties  and  the 
transfer of loans  and Accelerated Extrajudicial Collateral Enforcement (Part 2 / 2). SWD (2018) 75 

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The proposal is supported by a positive opinion issued by the RSB as regards the accelerated 
extrajudicial collateral enforcement on 12 January 201822. 

As proposed by the RSB, the impact assessment was amended by including the description of 
the impact of the proposal on Member States' national legislation. 

• 

Regulatory fitness and simplification 

A harmonised authorisation framework reduces administrative costs across the EU and allows 
credit servicers to scale up their activities in different Member States by using the passport. 

• 

Fundamental rights 

The  proposal  respects  the  fundamental  rights  and  observes  the  principles  recognised  by  the 
Charter of Fundamental Rights of the European Union, in particular the freedom to conduct a 
business,  the  right  to  property,  the  right  to  a  fair  trial,  the  protection  of  personal  data  and 
consumer protection. 

4. 

BUDGETARY IMPLICATIONS 

This legislative proposal implies no budgetary costs for the budget of the European Union. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

An evaluation is envisaged 5 years after the implementation of the measure and according to 
the  Commission's  better  regulation  Guidelines.  The  objective  of  the  evaluation  will  be  to 
assess, among other things, how effective and efficient it has been in terms of achieving the 
policy  objectives  and  to  decide  whether new  measures  or  amendments  are  needed. Member 
States shall provide the Commission with the information necessary for the preparation of that 
Report. 

• 

Explanatory documents (for directives) 

Considering  the  diversity  of  the  national  legal  and  supervisory  systems  and  the  need  for  a 
consistent  implementation  of  the  Directive,  the  notification  of  the  transposition  measures 
taken by the Member States should be accompanied by one or more documents explaining the 
relationship between the components of the Directive and the corresponding parts of national 
transposition instruments. 

• 

Detailed explanation of the specific provisions of the proposal 

Title I comprises of the subject matter, scope and definitions. 

This  Directive  applies  to  purchasers  and  servicers  of  credit  originally  issued  by  a  credit 
institution  or  its  subsidiaries, irrespective of the type of borrower concerned. This Directive 
shall  not  apply  to  purchasing  and  servicing  of  a  credit  agreement  carried  out  by  a  credit 
institution and its subsidiaries in the EU or to purchasing and servicing of credit agreements 
issued by other types of creditors than credit institutions and their subsidiaries. 

22 

Regulatory  Scrutiny  Board,  Opinion:  Impact  Assessment  /  Accelerated  Extrajudicial  Collateral 
Enforcement, Ares(2018)215454 - 12/01/2018. 

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As  regards  the  accelerated  extrajudicial  collateral  enforcement  procedure,  this  Directive 
applies to credit agreements concluded between creditors, primarily banks, and borrowers for 
the  purposes  of  their  trade,  business  or  profession  which  are  secured  by  any  movable  and 
immovable assets owned by the borrower and which have been pledged to a creditor in order 
to  secure  the  repayment  of  a  loan.  Restricting  the  scope  to  corporate  loans  should  avoid 
negative  impacts  on  consumers  and  households.  Even  for  business  borrowers,  the  main 
residence  of  a  business  owner  will  be  excluded  from  the  scope,  based  on  social 
considerations.  

Article 3 sets out the definitions that are used for the purposes of this Directive. 

Title  II  establishes  a  framework  for  servicers  of  credit  agreements  issued  by  credit 
institutions.  

Chapter I contains the rules for the authorisation of credit servicers. 

Article 5 sets the maximum set of requirements that need to be fulfilled by credit servicers to 
be authorised in their home Member State.  

Article  6  sets  out  the  procedures  for  the  authorisation  and  Article  7  the  cases  when  the 
authorisation may be withdrawn. 

Article  8  introduces  an  obligation  for  the  set-up  of  a  public  register  of  authorised  credit 
servicers in each Member State.  

Article 9 contains a requirement that the relationship between a credit servicer and a creditor 
is  based  on  a  written  contract  which,  among  other  issues,  includes  a  clear  reference  to  the 
obligation  to  observe  Union  and  national  law  applicable  to  the  credit agreement.  Moreover, 
the  credit  servicer  is  required  to  keep  records  for  a  period  of  10  years  that  competent 
authorities can have access to. 

Article  10  provides  for  rules  concerning  the  outsourcing  of  activities  by  credit  servicers  by 
ensuring  that  they  remain  fully  responsible  for  all  obligations  under  the  national  provisions 
transposing this Directive. 

Chapter II deals with the provision of credit servicing cross-border. 

Article 11 requires Member States to ensure the freedom to provide services in the Union for 
authorised credit servicers. To this end, specific provisions on procedures and communication 
between home and host authorities are set in the Directive. 

Article 12 provides for specific rules on how such cross-border servicers shall be supervised 
by sharing the burden of supervision between home and host competent authorities. 

Title III covers credit purchasers. 

Article 13 provides that creditors shall provide all necessary information to a credit purchaser 
prior to entering into a contract, with due respect to personal data protection rules. When the 
first  transfer  of  the  credit  takes  place  from  a  credit  institution  to  a  non-credit  institution 
purchaser, the supervisor of the credit institution shall be informed thereof. 

Article 14 mandates the use by credit institutions of data standards provided by the European 
Banking Authority.  

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Article  15  imposed  an  obligation  on  the  representatives  established  in  the  Union  of  credit 
purchasers not established in the Union, to use an authorised credit servicer or a Union credit 
institution in case of credit agreements concluded with consumers. 

Article 16 contains the  rules  by which credit purchasers  inform competent  authorities  about 
the servicing of the credit purchased. 

Article 17 contains a rule whereby, where a transfer of the credit agreement is concluded, the 
third  country  purchaser  designates  a  representative  established  in  the  Union.  This 
representative will be responsible for the obligations imposed on credit purchasers under the 
Directive. 

Article  18  sets  the  rules  concerning  the  enforcement  of  a  credit  agreement  by  the  credit 
purchaser  directly  and  the  information  obligations  set  on  the  credit  purchasers  and  the 
competent authorities. 

Article 19 introduces information obligations of the purchaser in case the purchaser transfers 
the credit agreement. 

Title IV covers the supervision by competent authorities.  

Article  20  sets  obligations  of  on-going  compliance  with  the  national  provisions  transposing 
this  Directive  and  the  designation  of  competent  authorities  responsible  for  carrying  out  the 
functions and duties set by the national provisions implementing the Directive. 

Article  21  details  the  supervisory  powers  of  the  competent  authorities  while  Article  22 
provides for the rules on administrative penalties and remedial measures. 

Title V establishes a framework on accelerated extrajudicial collateral enforcement, which is 
an instrument agreed between the secured creditor and business borrower on a voluntary basis 
and which the secured creditor may exercise once the conditions set out in Article 23 are met. 

Article 24 requires Member States to have in place at least one enforcement procedure which 
may  be  used  for  the  purpose  of  the  accelerated  extrajudicial  collateral  enforcement 
mechanism  set  out  in  this  proposal.  Member  States  may  choose  among  public  auction  and 
private sale procedures which are commonly used to realise collateral. Where the national law 
establishes the appropriation of the asset procedure, that procedure may also be used for the 
purpose  of  this  accelerated  extrajudicial  collateral  enforcement  procedure.  Member  States 
have  discretion  is  deciding  upon  the  type  of  enforcement  procedure  which  should  be  made 
available  to  creditors,  given  the  multiple  links  of  collateral  enforcement  with  private  and 
public laws, and, in particular, depending on the type of security right which is used to secure 
collateral. 

Article  28  gives  the  borrower  the  right  to  challenge  the  use  of  this  accelerated  extrajudicial 
collateral enforcement procedure before national courts.  

In order to protect the borrower, Article 29 requires the creditor to pay the business borrower, 
in  case  of  excessive  amount  recovered  through  this  accelerated  extrajudicial  collateral 
enforcement procedure as compared to the outstanding debt, any positive difference between 
the sum outstanding of the secured credit agreement and the proceeds of the sale of the asset 
(following  public auction or  private sale). In  case  of appropriation, it is appropriate that the 
creditor  will  be  required  to  pay  the  borrower  any  positive  difference  between  the  sum 
outstanding of the secured credit agreement and the valuation of the asset. 

Article  32  aims  at  ensuring  full  consistency  and  complementarity  of  this  accelerated 
extrajudicial collateral enforcement procedure with pre-insolvency or insolvency proceedings 
initiated  in  accordance  with  Member  States'  laws.  Article  32  also  aims  at  ensuring  full 

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consistency  and  complementarity  of  this  accelerated  extrajudicial  collateral  enforcement 
procedure  with  the  Restructuring  Proposal  by  stating  that  creditors,  including  secured 
creditors  of  a  company  or  entrepreneur  that  is  subject  to  a  restructuring  proceedings,  are 
subject to the stay of individual enforcement actions. 

Article  33  requires  Member  States  and,  in  case  of  credit  institutions,  credit  institutions' 
supervisors  to  collect,  on  an  annual  basis,  data  on  the  number  of  secured  loans  which  are 
enforced through out-of-court procedures, the timeframes and value of recovery rates, and to 
transmit this data to the Commission annually. 

Title VI provides in Article 34 for specific safeguards for consumers in case of modification 
of  the  credit  agreement  and  in  Article  35  for  the  handling  of  complaints  both  by  the  credit 
servicer and by the competent authorities. 

Article 36 reaffirms the observance of personal data protection rules. 

Article  37  provides  for  general  administrative  cooperation  obligation  between  competent 
authorities. 

Title VII contains in Article 38 an amendment  to  the Mortgage Credit Directive to provide 
that, in case of a transfer of credit to consumer covered by that Directive, the consumer shall 
be  entitled  to  plead  against  the  credit  purchaser  any  defence  which  was  available  to  him 
against the original creditor and an obligation to inform the consumer. 

Title VIII contains final provisions about the set-up of a Committee to assist the Commission, 
the review, the transposition deadline, entry into force and addressees

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2018/0063 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on credit servicers, credit purchasers and the recovery of collateral 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 53 and Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee23,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

23 
24 

25 

The establishment of a comprehensive strategy to address the issue of non-performing 
loans  (NPLs)  is  a  priority  for  the  Union24.  While  addressing  NPLs  is  primarily  the 
responsibility  of  credit  institutions  and  Member  States,  there  is  also  a  clear  Union 
dimension to reduce current stocks of NPLs, as well as to prevent any excessive build-
up  of  NPLs  in  the  future.  Given  the  interconnectedness  of the  banking  and  financial 
systems across the Union where credit institutions operate in multiple jurisdictions and 
Member  States,  there  is  significant  potential  for  spill-over  effects  between  Member 
States and the Union at large, both in terms of economic growth and financial stability. 

An  integrated  financial  system  will  enhance  the  resilience  of  the  Economic  and 
Monetary  Union  to  adverse  shocks  by  facilitating  private  cross-border  risk-sharing, 
while at the same time reducing the need for public risk-sharing. In order to achieve 
these objectives, the Union should complete the Banking Union and further develop a 
Capital  Markets  Union  (CMU).  Addressing  high  stocks  of  NPLs  and  their  possible 
future accumulation is essential to completing the Banking Union as it is essential for 
ensuring  competition  in  the  banking  sector,  preserving  financial  stability  and 
encouraging lending so as to create jobs and growth within the Union. 

In  July  2017  the  Council  in  its  "Action  Plan  to  Tackle  Non-Performing  Loans  in 
Europe"25  called  upon  various  institutions  to  take  appropriate  measures  to  further 
address  the  high  number  of  NPLs  in  the  Union.  The  Action  Plan  sets  out  a 
comprehensive  approach  that  focuses  on  a  mix  of  complementary  policy  actions  in 

the  Reflection  Paper  on  Deepening 

OJ C , , p. . 
See 
https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf, 31.5.2017 
11/07/2017, 
performing-loans/pdf. 

http://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-

and  Monetary  Union 

the  Economic 

at: 

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18 

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four areas: (i) bank supervision and regulation (ii) reform of restructuring, insolvency 
and  debt  recovery  frameworks,  (iii)  developing  secondary  markets  for  distressed 
assets,  and  (iv)  fostering  restructuring  of  the  banking  system.  Actions  in  these  areas 
are  to  be  taken  at  national  level  and  at  Union  level  where  appropriate.  The 
Commission announced a similar intention in its "Communication on completing the 
Banking Union" of 11 October 201726, which called for a comprehensive package on 
tackling NPLs within the Union. 

This  Directive,  together  with  other  measures  which  the  Commission  is  putting 
forward, as well as the action taken by the ECB in the context of banking supervision 
under  the  Single  Supervisory  Mechanism  (SSM)  and  by  the  European  Banking 
Authority  will  create  the  appropriate  environment  for  credit  institutions  to  deal  with 
NPLs on their balance sheets, and will reduce the risk of future NPL accumulation. 

Credit  institutions  will  be  required  to  put  aside  sufficient  resources  when  new  loans 
become non- performing, which should create appropriate incentives to address NPLs 
at an early stage and should prevent an excessive accumulation of them. Where loans 
become  non-performing,  more  efficient  enforcement  mechanisms  for  secured  loans 
would allow credit institutions to enforce NPLs, subject to appropriate safeguards for 
borrowers. Nevertheless, should NPL stocks become too high  – as it is currently the 
case for some credit institutions and some Member States – credit institutions should 
be  able  to  sell  them  in  efficient,  competitive  and  transparent  secondary  markets  to 
other  operators.  Competent  authorities  of  credit  institutions  will  guide  them  in  this, 
based on their existing bank-specific, so-called Pillar 2, powers under Regulation (EU) 
No 575/2013 of the European Parliament and of the Council  27 (CRR). Where NPLs 
become  a  significant  and  broad-based  problem,  Member  States  can  set  up  national 
asset  management  companies  or  other  alternative  measures  within  the  framework  of 
current state aid and banks resolution rules. 

This  Directive  should  enable  credit  institutions  to  better  deal  with  loans  once  these 
become non-performing by improving conditions to either enforce the collateral used 
to secure the credit or to sell the credit to third parties. The introduction of accelerated 
collateral enforcement as a swift mechanism for the recovery of collateral value would 
reduce the costs for resolving NPLs and would hence support both credit institutions 
and purchasers of NPLs in recovering value. Moreover, when credit institutions face a 
large  build-up  of  NPLs  and  lack  the  staff  or  expertise  to  properly  service  them,  one 
viable  solution  would  be  to  either  outsource  the  servicing  of  these  loans  to  a 
specialised credit servicer or to transfer the credit agreement to a credit purchaser that 
has the necessary risk appetite and expertise to manage it. 

The  two  solutions  for  credit  institutions  to  deal  with  NPLs  provided  for  by  this 
Directive are mutually reinforcing. The shorter time for enforcement and the increased 
recovery  rates,  as  expected  with  accelerated  extrajudicial  collateral  enforcement 
increases the value of an NPL. In turn, this would raise bid prices in NPL transactions. 
A  further  effect  is  that  selling  NPLs  will  be  less  complicated  if  the  loan  is 
collateralised.  The  reason  for  this  is  that  price  determination  is  simpler  for  a 
collateralised NPL than an unsecured one in  a secondary market transaction because 

Communication  to  the  European  Parliament,  the  Council,  the  European  Central  Bank,  the  European 
Economic and Social Committee and the Committee of the Regions on completing the Banking Union, 
COM(2017) 592 final, 11.10.2017. 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176, 27.6.2013, p. 1). 

(4) 

(5) 

(6) 

(7) 

26 

27 

EN 

19 

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the  value  of  the  collateral  sets  a  minimum  value  of  a  NPL.  With  a  more  liquid  and 
better  functioning  secondary  market  for  NPLs  where  investors  would  show  greater 
interest  for  NPLs  incorporating  the  accelerated  enforcement  feature,  there  would  be 
additional  incentives  for  credit  institutions  to  use  accelerated  extrajudicial  collateral 
enforcement  at  the  time  of  issue  of  the  new  loans.  Moreover,  the  harmonisation 
achieved  by  this  Directive  would  foster  development  of  pan-Union  NPL  investors, 
thus further improving market liquidity. 

(8)  While the terms 'loans' and 'banks' are commonly referred to in the public debate, the 
more  precise  legal  terms  of  'credit'  or  'credit  agreements'  and  'credit  institution'  are 
used  hereafter.  Furthermore,  unless  otherwise  specified,  the  terms  bank  and  credit 
institution also cover their subsidiaries. 

(9) 

This  Directive  should  foster  the  development  of  secondary  markets  for  NPLs  in  the 
Union by removing impediments to the transfer of NPLs by credit institutions to non-
credit  institutions,  while  at  the  same  time  safeguarding  consumers'  rights.  Any 
proposed measure should also simplify and harmonise the authorisation requirements 
for credit servicers. This Directive should therefore establish a Union-wide framework 
for both purchasers and servicers of credit agreements issued by credit institutions. 

(10)  However, currently, credit purchasers and credit servicers cannot reap the benefits of 
the  internal  market  due  to  barriers  erected  by  divergent  national  legislations  in  the 
absence  of  a  dedicated  and  coherent  regulatory  and  supervisory  regime.  Member 
States  have  very  different  rules  for  how  non-credit  institutions  may  acquire  credit 
agreements  from  credit  institutions.  Non-credit  institutions  which  purchase  credit 
issued by credit institutions are not regulated in some Member States, while in others 
they  are  subject  to  various  requirements,  sometimes  amounting  to  a  requirement  to 
obtain  an  authorisation  of  a  credit  institution.  These  differences  of  regulatory 
requirements have resulted in considerable obstacles to legally purchasing credit cross-
border in the Union mainly by increasing the compliance costs faced when seeking to 
purchase credit portfolios. As a result, credit purchasers operate in a limited number of 
Member States, which has resulted in little competition in the internal market, as the 
number  of  interested  credit  purchasers  remains  low.  This  has  led  to  an  inefficient 
secondary  market  for  NPLs.  In  addition,  the  essentially  national  markets  for  NPLs 
tend to remain of a small volume. 

(11)  The limited participation of non-credit institutions has resulted in low demand, weak 
competition  and  low  bid  prices  for  portfolios  of  credit  agreements  on  secondary 
markets,  which  is  a  disincentive  for  credit  institutions  to  sell  non-performing  credit 
agreements.  Therefore,  there  is  a  clear  Union  dimension  to  the  development  of 
markets for credits granted by credit institutions and sold to non-credit institutions. On 
the  one  hand,  it  should  be  possible  for  credit  institutions  to  sell  non-performing  or 
even performing credit agreements on a Union-wide scale in efficient, competitive and 
transparent secondary markets. On the other hand, completion of the Banking Union 
and  a  Capital  Markets  Union  make  it  necessary  to  act  in  order  to  prevent  the 
accumulation  of  non-performing  credit  agreements  on  credit  institutions'  balance 
sheets so that they can continue to perform their role of financing the economy. 

(12)  Creditors  should  be  able  to  enforce  a  credit  agreement  and  recover  the  amounts  due 
themselves  or  they  should  be  able  to  entrust  such  recovery  to  another  person  who 
provides  such  services  on  a  professional  basis,  namely  credit  servicers.  Equally, 
purchasers of credit from credit institutions often use the services of credit servicers in 

EN 

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order  to  recover  amounts  due  and  yet  credit  servicing  activities  are  not  subject  to  a 
Union framework. 

(13)  Certain  Member  States  regulate  credit  servicing  activities,  but  to  varying  degrees. 
Firstly,  only  some  Member  State  regulate  these  activities,  and,  those  that  do,  define 
them very differently. The increased regulatory compliance costs operate as a barrier 
to  the  development  of  expansion  strategies  by  means  of  secondary  establishment  or 
cross-border provision of services. Secondly, a considerable number of Member States 
requires authorisations for some of the activities that these credit servicers engage in. 
These authorisations impose different requirements and do not provide for possibilities 
of cross-border scaling up, this again operating as a barrier to the provision of cross-
border services. Finally, in some cases, local establishment is required by law, which 
hinders the exercise of the freedom to provide cross-border services. 

(14)  While  credit  servicers  can  provide  their  services  to  credit  institutions  and  to  credit 
purchasers  that  are  not  credit  institutions,  a  competitive  and  integrated  market  for 
credit servicers is linked to the development of a competitive and integrated market for 
credit  purchasers.  Since  credit  purchasers  often  do  not  have  the  capacity  to  service 
credit themselves, they may not purchase credit from credit institutions, if they cannot 
outsource the credit servicing to other entities.  

(15)  The  lack  of  competitive  pressure  on  the  market  for  purchasing  credit  and  on  the 
market  for  credit  servicing  activities  results  in  credit  servicing  firms  charging  credit 
purchasers high  fees for their services and leads to  low prices on secondary markets 
for credit. This reduces incentives for credit institutions to offload their stock of NPLs. 

(16)  Therefore, action at Union level is necessary in order to address the position of credit 
purchasers  and  credit  servicers  in  relation  to  credit  originally  granted  by  credit 
institutions.  It  is  not  proposed  to  cover  credit  originally  issued  by  non-credit 
institutions  or  debt  collection  in  general  at  this  stage,  as  there  is  no  evidence  of 
macroeconomic  relevance,  misaligned  incentives  or  ill-functioning  markets  for  such 
an extended scope.  

(17)  Although the purpose of this Directive is to strengthen the credit institutions' capacity 
to deal with credit that has become non-performing or risks becoming non-performing, 
the  secondary  market  for  credit  covers  both  performing  and  non-performing  credit. 
Actual  market  sales  encompass  credit  portfolios,  consisting  of  a  mix  of  performing, 
under-performing and non-performing credit. The portfolios include credit that is both 
secured and unsecured and that is owed by consumers or businesses. Where rules for 
the enforcement of credit differed for each type of credit or borrower, there would be 
additional costs to the packaging of those credit portfolios for sale. The provisions in 
this  Directive  that  target  the  development  of  the  secondary market  cover  performing 
and  non-performing  credit  in  order  to  avoid  a  situation  that  these  additional  costs 
would  discourage  investor  participation  and  fragment  this  emerging  market.  Credit 
institutions  will  benefit  from  facing  a  larger  investor  base  and  more  efficient  credit 
servicers.  Similar  benefits  will  accrue  to  asset  management  companies  that  are 
instrumental  in  some  Member  States  in  marketing  both  non-performing  and 
performing  credit  originated  from  credit  institutions  that  had  been  resolved  or  been 
restructured or that have otherwise offloaded them from their balance sheets28. 

28 

See Commission staff working document SWD(2018 72) on the AMC Blueprint. 

EN 

21 

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(18)  The  importance  placed  by  the  Union  legislature  on  the  protection  provided  for 
consumers in Directive 2014/17/EU of the European Parliament and of the Council 29, 
Directive  2008/48/EC of the European Parliament  and of the Council  30  and  Council 
Directive 93/13/EEC31 means that the assignment of the creditor's rights under a credit 
agreement or of the agreement itself to a credit purchaser should not affect the level of 
protection  granted  by  Union  law  to  consumers  in  any  way.  Credit  purchasers  and 
credit  servicers  should  therefore  comply  with  Union  law  as  applicable  to  the  initial 
credit  agreement  and  the  consumer  should  retain  the  same  level  of  protection  as 
provided under Union law or as determined by Union or national conflict of law rules 
regardless of the law applicable to the credit purchaser or credit servicer.  

(19)  This Directive should not affect acts of Union law concerning judicial cooperation in 
civil  matters,  notably  the  provisions  on  the  law  applicable  to  contractual  obligations 
and on jurisdiction, including the application of those acts and provisions in individual 
cases  under  Regulation  (EC)  No  593/2008  of  the  European  Parliament  and  of  the 
Council32  and,  Regulation  (EU)  1215/2012  of  the  European  Parliament  and  of  the 
Council33. All creditors and any persons representing them are bound to respect those 
acts  of  Union  law  in  their  dealings  with  the  consumer  and  national  authorities  to 
ensure that consumer rights are protected. 

(20) 

In order to ensure a high level of consumer protection, Union and national law provide 
for a number of rights and safeguards related to credit agreements promised or granted 
to a consumer. Those rights and safeguards apply in particular to the negotiation and 
conclusion  of  the  credit  agreement  and  to  its  performance  or  default  thereof.  This  is 
notably  the  case  in  relation  to  long-term  consumer  credit  agreements  falling  within 
Directive  2014/17/EU,  in  respect  of  the  right  of  the  consumer  to  discharge  fully  or 
partially his obligations under a credit agreement prior to the expiry of that agreement 
or  to  be  informed  by  means  of  the  European  Standardised  Information  Sheet,  where 
applicable,  on  the  possible  transfer  of  the  credit  agreement  to  a  credit  purchaser. 
Borrower  rights  should  also  not  be  altered  if  the  transfer  of  the  credit  agreement 
between a credit institution and a purchaser takes the form of contract novation. 

(21) 

In addition, this Directive does not reduce the scope of application of Union consumer 
protection  rules  and  to  the  extent  credit  purchasers  qualify  as  creditors  under  the 
provisions of Directive 2014/17/EU and Directive 2008/48/EC, they should be subject 
to the specific obligations set by Article 35 of the Directive 2014/17/EU or Article 20 
of the Directive 2008/48/EC, respectively.  

(22)  Union credit institutions and their subsidiaries undertake credit servicing activities as 
part  of  their  normal  business.  They  have  the  same  obligations  with  regard  to  credit 
they have issued themselves and credit they purchased from another credit institution. 
Since they are already regulated and supervised, application of this Directive to their 

29 

30 

31 

32 

33 

Directive  2014/17/EU  of  the  European  Parliament  and  of  the  Council  of  4  February  2014  on  credit 
agreements  for  consumers  relating  to  residential  immovable  property  and  amending  Directives 
2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34). 
Directive  2008/48/EC  of  the  European  Parliament  and  of  the  Council  of  23  April  2008  on  credit 
agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 60/34, 22.5.2008, p. 66). 
Council  Directive  93/13/EEC  of  5  April  1993  on  unfair  terms  in  consumer  contracts  (OJ  L  95, 
21.4.1993, p. 29).  
Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the 
law applicable to contractual obligations (Rome I), OJ L 177, 4.7.2008, p. 6–16. 
Regulation  (EU)  1215/2012 of  the  European  Parliament  and  of  the  Council  of  12 December  2012  on 
jurisdiction and the recognition and enforcement of judgments in civil and commercial  matters, OJ L 
351, 20.12.2012, p. 1-32. 

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credit  servicing  or  purchasing  activities  would  mean  unnecessary  duplication  of 
authorisation  and  compliance  costs  and  therefore  they  are  not  covered  by  this 
Directive.  

(23) 

In  order  to  allow  existing  credit  purchasers  and  credit  servicers  to  adapt  to  the 
requirements of the national provisions implementing this Directive and, in particular, 
to allow credit servicers to be authorised, this Directive will only apply to transfers of 
credit  agreements  that  take  place  six  months  after  the  transposition  deadline  has 
expired. 

(24)  The authorisation of a credit servicer to provide credit servicing activities throughout 
the Union should be subject to a uniform and harmonised set of conditions that should 
be  applied  in  a  proportionate  manner  by  the  competent  authorities.  To  avoid  a 
reduction in debtor or borrower protection and in order to promote trust, the conditions 
for  granting  and  maintaining  an  authorisation  as  a  credit  servicer  should  ensure  that 
credit  servicers,  persons  who  hold  a  qualifying  holding in  the  credit servicer  or  who 
are  part  of  the  management  of  the  service  provider  have  a  clean  police  record  in 
relation  to  serious  criminal  offences  linked  to  crimes  against  property,  to  crimes 
related to  financial  activities or  to crimes  against the physical integrity and that they 
are of good repute. Similarly, these persons as well as the credit servicer should not be 
subject  to  an  insolvency  procedure  or  have  not  previously  been  declared  bankrupt, 
unless  they  have  been  reinstated  in  accordance  with  national  law.  Finally,  to  ensure 
compliance  with  debtor  protection  as  well  as  personal  data  protection  rules,  it  is 
necessary  to  require  that  appropriate  governance  arrangements  and  internal  control 
mechanisms and recording and handling of complaints, are established and subject to 
supervision.  Moreover,  credit  servicers  should  be  obliged  to  act  fairly  and  with  due 
consideration for the financial situation of the borrowers. Where debt advice services 
facilitating  debt  repayment  are available at  national  level,  the  credit  servicers  should 
consider referring borrowers to such services. 

(25)  To avoid lengthy procedures and uncertainty, it is necessary to establish requirements 
regarding the information applicants are required to submit, as well as the reasonable 
deadlines for the issue of an authorisation and the circumstances for its withdrawal of 
authorisation. Where authorities withdraw an authorisation of a credit servicer which 
provides  credit  servicing  activities  in  other  Member  States,  competent  authorities  in 
the  host  Member  State  should  be  informed.  Equally,  an  up-to-date  online  public 
register should be established in each Member State to ensure transparency as regards 
the number and identity of authorised credit servicers. 

(26) 

It should be established that credit servicers are responsible for making sure that where 
they outsource their activities to credit service providers, this does not result in undue 
operational risk or non-compliance by the credit service provider with any national or 
Union legal requirements or restrict the capacity of a regulatory supervisor to perform 
its duty and safeguard borrower rights. 

(27)  Given  that  when  a  creditor  entrusts  the  management  and  enforcement  of  a  credit 
agreement, the creditor delegates its rights and duties and also its  direct contact with 
the  borrower  to  the  credit  servicer  while  still  remaining  ultimately  responsible,  the 
relationship  between  creditor  and  credit  servicer  should  be  clearly  established  in 
writing  and  it  should  be  possible  for  competent  authorities  to  verify  how  such  a 
relationship is determined. 

(28)  To  ensure  the  right  of  a  credit  servicer  to  engage  in  cross-border  activities  and  to 
provide for their supervision, this Directive sets up a procedure for the exercise of the 

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right  of  an  authorised  credit  servicer 
in  cross-border  activity. 
Communication  between  authorities  in  the  home  and  host  Member  States  as  well  as 
with a credit servicer should take place within reasonable deadlines. 

to  engage 

(29) 

In  order  for  an  effective  and  efficient  supervision  of  cross-border  credit  servicers,  a 
specific framework should be created for the cooperation between home and the host 
competent  authorities.  This  framework  should  allow  the  exchange  of  information, 
while  preserving  its  confidentiality,  on  and  off-site  inspections,  the  provision  of 
assistance,  the  notification  of  results  of  checks  and  inspections  and  of  any  measures 
taken. 

(30)  An important prerequisite for the taking up of the role by credit purchasers and credit 
servicers  should  be  that  they  can  access  all  relevant  information  and  Member  State 
should  ensure  that  this  is  possible,  while  at  the  same  time  observing  Union  and 
national data protection rules. 

(31)  Where  a  credit  institution  transfers  a  credit  agreement,  they  should  be  required  to 
inform their supervisor and the competent authority  for supervising compliance with 
this Directive about the main characteristics of the transferred credit portfolio and the 
identity of the purchaser and, where  applicable, its representative in  the Union. That 
competent  authority  should  be  obliged  to  transmit  that  information  to  the  authorities 
competent  to  supervise  the  credit  purchaser  and  the  competent  authority  where  the 
borrower is  established.  Such  transparency  requirements  allow  for  a  harmonised  and 
effective monitoring of the transfer of credit agreements within the Union. 

(32)  As  part  of  the  Council's  Action  Plan,  credit institutions'  data  infrastructure  would  be 
strengthened  by  having  uniform  and  standardised  data  for  non-performing  credit 
agreements.  The  European  Banking  Authority  has  developed  data  templates  that 
provide  information  about  credit  exposures  in  the  banking  book  and  allow  potential 
buyers to evaluate the value of the credit agreements and carry out their due diligence. 
Applying such templates to credit agreements would reduce information asymmetries 
between potential buyers and sellers of credit agreements and, thus, contribute to the 
development  of  a  functioning  secondary  market  in  the  Union.  The  EBA  should 
therefore develop the data templates into implementing technical standards and credit 
institutions  should  use  those  standards  in  order  to  facilitate  the  valuation  of  credit 
agreements for sale. 

(33)  Since  the  valuation  of  a  portfolio  of  non-performing  credit  is  complicated  and 
complex,  actual  buyers on  secondary  markets  are  sophisticated  investors.  Often  they 
are  investment  funds,  financial  institutions  or  credit  institutions.  As  they  are  not 
creating  new  credit,  but  are  buying  existing  credit  at  own  risk,  they  do  not  cause 
prudential concerns and their potential contribution to systemic risk is negligible. It is 
therefore not justified to require those types of investors to apply for an authorisation 
or  to  set  special  conditions  for  them  to  engage  in  such  activities.  It  is  however 
important that Union and national consumer protection rules continue to apply and the 
borrowers' rights continue to be those arising from the initial credit agreement. 

(34)  Third-country credit purchasers may make it harder for the Union consumer to rely on 
their  rights  under  Union  law  and  for  the  national  authorities  to  supervise  the 
enforcement of the credit agreement. Credit institutions may also be discouraged from 
transferring  such  credit  agreements  to  third-country  credit  purchasers  because  of  the 
reputational  risk  involved.  Imposing  an  obligation  on  the  representative  of  the  third-
country  purchasers  of  consumer  credit  to  appoint  a  credit  institution  or  a  credit 
servicer authorised in the Union for servicing a credit agreement ensures that the same 

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standards of consumers' rights are preserved after the transfer of the credit agreement. 
The credit servicer is under an obligation to respect the applicable Union and national 
laws  and  the  national  authorities  in  individual  Member  States  should  be  given  the 
necessary powers to effectively supervise its activity. 

(35)  Credit purchasers that use the services of credit servicers or credit institutions should 
inform  the  competent  authorities  thereof  so  as  to  allow  them  to  exercise  their 
supervisory as regards the conduct of the credit servicer vis-à-vis the borrower. Credit 
purchasers  also  have  an  obligation  to  inform  in  a  timely  manner  the  competent 
authorities in charge of their supervision if they engage a different credit institution or 
credit servicer. 

(36)  Credit purchasers that enforce the purchased credit agreement directly should do so in 
compliance  with  the  law  applicable  to  the  credit  agreement,  including  consumer 
protection rules applicable to the borrower. National rules concerning in particular the 
enforcement  of  contracts,  consumer  protection,  criminal  law,  continue  to  apply  and 
competent  authorities  should  ensure  their  compliance  with  them  on  Member  States' 
territory. 

(37) 

In order to facilitate the enforcement of the obligations set out in the Directive, where 
a  credit  purchaser  is  not  established  in  the  Union  national  law  implementing  this 
Directive should  provide that, where a transfer of a credit agreement is concluded, a 
third  country  credit  purchaser  appoints  a  representative  established  in  the  Union, 
mandated  to  be  addressed  by  the  competent  authorities  in  addition  or  instead  of  the 
credit  purchaser.  This  representative  is  responsible  for  the  obligations  imposed  on 
credit purchasers by this Directive. 

(38)  At  the  moment,  different  authorities  are  entrusted  with  the  authorisation  and 
supervision of credit servicers and credit purchasers in Member States, and therefore it 
is  essential  that  Member  States  clarify  their  role  and  allocate  adequate  powers, 
especially  as  they  may  need  to  supervise  entities  engaged  in  providing  services  in 
other Member States. In order to ensure efficient and proportionate supervision across 
the Union, Member States should grant the necessary powers for competent authorities 
to carry out their duties under this Directive, including the power to obtain necessary 
information, to investigate possible breaches, to handle borrowers' complaints and to 
impose  sanctions  and  remedial  measures, 
the 
authorisation.  Where  such  sanctions  are  applied,  Member  States  should  ensure  that 
competent authorities apply them in a proportionate manner and give reasons for their 
decisions and that in addition those decisions should be subject to judicial review also 
in cases where competent authorities do not act within the timeframes provided. 

the  withdrawal  of 

including 

(39) 

In  the  Council's  "Action  Plan  to  Tackle  Non-Performing  Loans  in  Europe",  a 
legislative initiative was put forward to enhance the protection of secured creditors by 
providing  them  with  more  efficient  methods  of  value  recovery  from  secured  credit 
through an accelerated extrajudicial collateral enforcement procedure. 

(40)  Expedited  and  efficient  out-of-court  enforcement  mechanisms  which  enable  secured 
creditors to recover value from collateral in case of borrower's default are not available 
in  some  Member States, which  means that  in those  Member States  secured creditors 
are  only  able  to  enforce  collateral  in  court,  which  can  be  lengthy  and  costly.  Where 
available,  the  scope  and  efficiency  of  the  extrajudicial  enforcement  procedures  vary 
from one Member State to another. For that reason it is necessary to establish a distinct 
common  mechanism  available  in  all  Member  States.  That  mechanism  should  not, 

EN 

25 

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however,  replace existing national enforcement measures including those  that do not 
require the involvement of courts. 

(41)  The  inefficiency  of  some  Member  States'  extrajudicial  enforcement  procedures  is  an 
important factor for low recovery rates  where  business borrowers default on secured 
credit agreements. The length of some existing procedures entails additional costs for 
secured creditors and loss of value of the assets provided as collateral. In the Member 
States  which  have  not  established  extrajudicial  enforcement  procedures  for  various 
types of collateral, secured creditors face often lengthy judicial enforcement processes. 

(42)  Existing enforcement procedures within the Union sometimes result in a lack of level-
playing  field  for  credit  institutions  and  companies  across  the  Union  with  regard  to 
access to credit, particularly for SMEs which depend on bank credit more than larger 
companies.  Uneven  recovery  rates  across  Member  States  lead  to  differences  in  the 
availability  of  bank  credit  for  SMEs  because  the  credit  institutions'  lending  capacity 
decreases as NPLs accumulate on their balance sheets, due to prudential requirements 
and  internal  resources  which  need  to  be  dedicated  to  dealing  with  NPLs.  This 
contributes  to  a  lack  of  confidence  in  the  ability  to  enforce  collateral  in  different 
Member  States  and  may  lead  to  higher  borrowing  costs  corresponding  to  place  of 
establishment  and  irrespective  of  their  real  creditworthiness.  Therefore,  a  common 
new  procedure  is  required  for  the  single  market,  the  Banking  Union  and  the  Capital 
Markets  Union  and  it  is  necessary  to  ensure  that  credit  institutions  and  undertakings 
which  are  authorised  to  issue  credit  by  concluding  secured  credit  agreements  in  all 
Member  States  have  the  ability  to  enforce  those  agreements  through  effective  and 
expedited extrajudicial enforcement procedures. 

(43) 

In  order  to  protect  consumers,  credit  agreements  provided  to  consumers  should  be 
excluded  from  the  scope  of  the  accelerated  extrajudicial  enforcement  mechanism 
provided  for  in  this  Directive.  Equally,  in  order  to  protect  sole  entrepreneurs,  this 
mechanism should not apply to credit agreements secured by collateral in the form of 
real estate which is the main residence of the sole entrepreneur.  

(44)  Since  this  accelerated  extrajudicial  collateral  enforcement  mechanism  is  a  voluntary 
instrument  which  is  subject  to  agreement  between  the  secured  creditor  and  the 
business  borrower,  it  is  necessary  that  the  borrower  be  informed  about  the 
consequences  and  of  the  conditions  under  which  this  accelerated  procedure  may  be 
used  by  the  creditor.  Therefore  the  conditions  should  be  established  in  a  written 
agreement,  or  in  a  notarised  format  where  national  law  so  provides,  between  the 
creditor and the borrower. 

(45) 

(46) 

In  order  to  protect  business  borrowers,  it  is  appropriate  to  ensure  that  the  necessary 
measures are in place to ensure that creditors afford borrowers a reasonable period of 
time for execution of payment to avert this kind of enforcement.  

In order to ensure that this accelerated extrajudicial collateral enforcement mechanism 
is  an  expedited  and  effective  instrument  to  recover  value  from  collateral,  the 
agreement  by  which  the  secured  creditor  and  the  business  borrower  agree  upon  it 
should  comprise  a  directly  enforceable  title,  which  is  a  clause  in  the  agreement  that 
enables direct execution of the collateral through AECE without the need to obtain an 
enforceable title from the court.  

(47) 

In  Member  States  which  have  already  established  extrajudicial  enforcement 
procedures,  those  procedures  are  interlinked  with  elements  of  national  civil, 
commercial,  property,  insolvency  and  public  laws,  and  the  type  of  enforcement 

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26 

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(48) 

procedure  that  may  be  used  depends  on  the  type  of  the  asset  provided  as  collateral, 
with procedures for immovable assets often entailing stricter procedural elements and 
minimum  judicial  oversight.  Therefore  Member  States  should  have  flexibility  in 
deciding upon the type of enforcement procedure which is made available to secured 
creditors for the purpose of this accelerated extrajudicial collateral enforcement: public 
auction or private sale, or, under some national frameworks, the appropriation of the 
asset. 

In order to ensure that the secured creditor only recovers what it is due by the business 
borrower  under  the  credit  agreement,  Member  States  should  ensure  that  the  secured 
creditor  is  obliged  to  pay  the  business  borrower  any  positive  difference  between  the 
sum  outstanding  of  the  secured  credit  agreement  and  the  proceeds  of  the  sale  of  the 
asset (following public auction or private sale) or, in the case of appropriation between 
the  sum  outstanding  and  the  valuation  of  the  asset  performed  for  the  purpose  of  the 
appropriation. It is appropriate that where Member States provide for the realisation of 
collateral  by  means  of  appropriation,  the  positive  difference  to  be  paid  out  to  the 
borrower should be the difference between the sum outstanding of the secured credit 
agreement and the valuation of the asset. Where less than the sum outstanding of the 
secured credit agreement is recovered through this accelerated enforcement, Member 
States  should  not  prevent  the  parties  to  a  secured  credit  agreement  from  expressly 
agreeing that the realisation of collateral by means of AECE is sufficient to repay the 
credit.  

(49)  Member  States  should  ensure  that  where  a  secured  credit  agreement  which  provides 
for  the  accelerated  extrajudicial  collateral  enforcement  set  out  in  this  Directive  is 
transferred by the creditor to a third party, that third party would acquire the right to 
avail  himself  of  the  accelerated  extrajudicial  collateral  enforcement  under  the  same 
terms and conditions as the secured creditor. 

(50) 

In  order  to  ensure  consistency  with  pre-insolvency  and  insolvency  rules,  Member 
States should ensure that where a preventive restructuring proceeding, as provided for 
in  the  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on 
preventive  restructuring  and  second  chance34,  is  initiated  in  respect  of  the  business 
borrower, the realisation of the collateral pursuant to an AECE is subject to a stay of 
individual  enforcement  actions 
laws 
transposing  that  Directive.  In  the  case  of  any  insolvency  proceedings  which  are 
initiated in respect of the business borrower, the realisation of the collateral pursuant 
to  an  AECE  should  also  be  subject  to  a  stay  of  individual  enforcement  actions  in 
accordance  with  applicable  national  laws.  It  should  be  left  to  national  law  whether 
secured  creditors  have  preferential  access  to  the  collateral  under  this  accelerated 
mechanism even once insolvency proceedings are open.  

in  accordance  with  applicable  national 

(51)  Given the limited availability of data on the number of extrajudicial procedures used 
by  credit  institutions  to  recover  value  from  collateral  in  case  of  borrower's  default, 
national competent authorities which supervise credit institutions should be required to 
collect  information  on  the  number  of  secured  credit  agreements  which  are  enforced 
through  AECE  and  the  timeframes  for  such  enforcement.  In  order  to  gain  a  better 
understanding of the effectiveness of the exercise of AECE within the Union, Member 

34 

Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  preventive  restructuring 
frameworks,  second  chance  and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and 
discharge procedures and amending Directive 2012/30/EU, COM/2016/0723 final, 22.11.2016. 

EN 

27 

  EN 

 
                                                 
States  should  provide  annual  statistical  data  on  these  matters  to  the  Commission 
starting from one year after the date of application of this Directive. 

(52)  Without  prejudice 

to  pre-contractual  obligations  under  Directive  2014/17EU, 
Directive 2008/48/EC and Directive 93/13/EEC, and in order to ensure a high level of 
consumer protection, the consumer should be presented, in due time and prior to any 
modifications  to  the  terms  and  conditions  of  the  credit  agreement,  with  a  clear  and 
comprehensive list of any such changes, the timescale for their implementation and the 
necessary details as well as the name and address of the national authority where he or 
she may lodge a complaint. 

(53)  Since the performance of secondary markets for credit will depend to a large extent on 
the  good  reputation  of  the  entities  involved,  credit  servicers  should  establish  an 
efficient  mechanism  by  which  to  treat  borrower  complaints.  Member  States  should 
ensure  that  authorities  competent  for  the  supervision  of  credit  purchases  and  credit 
servicers have effective and accessible procedures to deal with borrowers' complaints. 

(54)  Both the provisions of Regulation (EU) 2016/679 of the European Parliament and of 
the Council35 and Regulation (EC) No 45/2001 of the European Parliament and of the 
Council36 apply to the processing of personal data for the purposes of this Directive. In 
particular,  where  personal  data  is  processed  for  the  purposes  of  this  Directive,  the 
precise  purpose  should  be  specified,  the  relevant  legal  basis  referred  to,  the  relevant 
security requirements laid down in Regulation (EU) 2016/679 complied with, and the 
principles  of  necessity,  proportionality,  purpose  limitation  and  proportionate  data 
retention  period  respected.  Also,  personal  data  protection  by  design  and  data 
protection  by  default  should  be  embedded  in  all  data  processing  systems  developed 
and used within the framework of this Directive. Equally, administrative cooperation 
and mutual assistance between the competent authorities of the Member States should 
be  compatible  with  the  rules  on  the  protection  of  personal  data  laid  down  in 
Regulation  (EU)  2016/679  of  the  European  Parliament  and  of  the  Council,  and  in 
accordance with national data protection rules implementing Union legislation. 

(55) 

(56) 

35 

36 

In  order  to  ensure  that  the  level  of  protection  of  the  consumer  is  not  affected  in  the 
event of an assignment to a third party of the creditor's rights under a mortgage credit 
agreement or of the agreement itself, an amendment to Directive 2014/17/EU should 
be  introduced  to  establish  that,  in  cases  of  a  transfer  of  credit  covered  by  that 
Directive,  the  consumer  is  entitled  to  plead  against  the  credit  purchaser  any  defence 
which  was  available  to  him  against  the  original  creditor  and  to  be  informed  of  the 
assignment. 

In  accordance  with  the Joint  Political  Declaration  of  28  September  2011  of  Member 
States  and  the  Commission  on  explanatory  documents,  Member  States  have 
undertaken  to  accompany,  in  justified  cases,  the  notification  of  their  transposition 
measures  with  one  or  more  documents  explaining  the  relationship  between  the 
components  of  a  directive  and  the  corresponding  parts  of  national  transposition 

Regulation  (EU)  2016/679  of  the  European  Parliament  and  of  the  Council  of  27  April  2016  on  the 
protection of natural persons with regard to the processing of personal data and on the free movement of 
such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, 
p. 1). 
Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on 
the  protection  of  individuals  with  regard  to  the  processing  of  personal  data  by  the  Community 
institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p. 1). 

EN 

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instruments. With regard to this Directive, the legislator considers the transmission of 
such documents to be justified, 

HAVE ADOPTED THIS DIRECTIVE: 

Title I 

Subject matter, scope and definitions 

Article 1 

Subject matter 

This Directive lays down a common framework and requirements for:  

(a) 

(b) 

(c) 

credit servicers acting on behalf of a credit institution or a credit purchaser in 
respect of a credit agreement issued by a credit institution or by its subsidiaries;  

credit purchasers of a  credit agreement issued by a  credit institution or by its 
subsidiaries; 

a  supplementary  common  accelerated  extrajudicial  collateral  enforcement 
mechanism  in  respect  of  secured  credit  agreements  concluded  between 
creditors and business borrowers which are secured by collateral. 

Article 2 

Scope  

1. 

Articles 3 to 22 and Articles 34 to 43 of this Directive shall apply to: 

(a) 

(b) 

a credit servicer of a credit agreement issued by a credit institution established 
in  the  Union  or  by  its  subsidiaries  established  in  the  Union  which  acts  on 
behalf of a creditor, in accordance with applicable Union or national law.  

a  credit  purchaser  of  a  credit  agreement  issued  by  a  credit  institution 
established  in  the  Union  or  by  its  subsidiaries  established  in  the  Union, 
whereby the credit purchaser assumes the creditor's obligations under the credit 
agreement, in accordance with applicable Union and national law; 

Articles  3,  23  to  33  and  39  to  43  of  this  Directive  shall  apply  to  secured  credit 
agreements concluded  between creditors and  business borrowers  which are  secured 
by  any  movable  and  immovable  assets  owned  by  the  business  borrower  and  which 
have  been  posed  as  collateral  to  a  creditor  in  order  to  secure  repayment  of  claims 
arising from the secured credit agreement. 

This  Directive  does  not  affect  the  protection  granted  to  consumers,  pursuant  to 
Directive 2014/17/EU, Directive 2008/48/EC, Council Directive 93/13/EEC and the 
national provisions transposing them, with regard to credit agreements falling within 
its scope. 

2. 

3. 

4. 

Articles 3 to 22 and 34 to 43 of this Directive shall not apply to the following:  

(a) 

the servicing of a credit agreement carried out by a credit institution established 
in the Union or its subsidiaries established in the Union; 

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(b) 

(c) 

(d) 

the  servicing  of  a  credit  agreement  that  was  not  issued  by  a  credit  institution 
established  in  the  Union  or  its  subsidiaries  established  in  the  Union,  except 
where the credit agreement issued is replaced by a credit agreement issued by 
such an institution or its subsidiaries; 

the  purchase  of  a  credit  agreement  by  a  credit  institution  established  in  the 
Union or its subsidiaries established in the Union; 

the  transfer of  credit  agreements  transferred  before  the  date  referred  to in  the 
second subparagraph of Article 41(2).  

5. 

Articles 3, 23 to 33 and 34 to 43 of this Directive shall not apply to: 

(a) 

(b) 

(c) 

secured credit agreements concluded between creditors and borrowers who are 
consumers as defined in point (a) of Article 3 of Directive 2008/48/EC; 

secured credit agreements concluded between creditors and business borrowers 
who are non-profit making companies; 

secured credit agreements concluded between creditors and business borrowers 
which are secured by the following categories of collateral: 

(i)  

(ii) 

financial  collateral  arrangements  as  defined  in  Article  2(1)(a)  of 
Directive 2002/47/EC37; 

immovable residential property which is the primary residence of a 
business borrower. 

Article 3  

Definitions 

For the purpose of this Directive, the following definitions shall apply: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

'credit  institution'  means  a  credit  institution  as  defined  in  point  (1)  of  Article 
4(1) of Regulation (EU) No 575/201338; 

'creditor' means a credit institution or any legal person who has issued a credit 
in the course of his trade, business or profession, or a credit purchaser;  

'borrower'  means  a  legal  or  natural  person  who  has  concluded  a  credit 
agreement with a creditor; 

'business  borrower'  means  a  legal  or  natural  person,  other  than  a  consumer, 
who has concluded a credit agreement with a creditor; 

'credit  agreement'  means  an  agreement  as  originally  issued,  modified  or 
replaced, whereby a creditor grants or promises to grant a credit in the form of 
a deferred payment, a loan or other similar financial accommodation; 

'secured  credit  agreement'  means  a  credit  agreement  concluded  by  a  credit 
institution  or  another  undertaking  authorised  to  issue  credit,  which  is  secured 
by either of the following collateral; 

37 

38 

Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2002  on  financial 
collateral arrangements (OJ  L 168 , 27.6.2002, p. 43). 
Regulation  (EU)  No 575/2013  of  the  European  Parliament  and  of  the  Council  of  26 June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU) 
No 648/2012 (OJ L 176, 27.6.2013, p. 1). 

EN 

30 

  EN 

 
                                                 
(a) 

(b) 

(7) 

(8) 

a mortgage, charge, lien or other comparable security right commonly used in a 
Member State in relation to immovable assets; 

a pledge, charge, lien or other comparable security right commonly  used  in a 
Member State in relation to movable assets; 

'credit  purchaser'  means  any  natural  or  legal  person  other  than  a  credit 
institution  or  a  subsidiary  of  a  credit  institution  which  purchases  a  credit 
agreement in the course of his trade, business or profession; 

'credit servicer' means any natural or legal person, other than a credit institution 
or its subsidiaries, which carries out one or more of the following activities on 
behalf of a creditor: 

(a)  monitors the performance of the credit agreement; 

(b) 

(c) 

(d) 

(e) 

(f) 

(9) 

collects  and  manages information  about  the status of the credit  agreement, of 
the borrower and of any collateral used to secure the credit agreement; 

informs the borrower of any changes in interest rates, charges or of payments 
due under the credit agreement; 

enforces the rights and obligations under the credit agreement on behalf of the 
creditor, including administering repayments; 

renegotiates the terms and conditions of the credit agreement with borrowers, 
where they are not a 'credit intermediary' as defined in Article 4(5) of Directive 
2014/17/EU or Article 3(f) of Directive 2008/48/EC; 

handles borrowers' complaints. 

‘home Member State’ means the Member State in which the credit servicer is 
domiciled or established. 

(10)  ‘host  Member  State’  means  a  Member  State,  other  than  the  home  Member 
State,  in  which  a  credit  servicer  has  established  a  branch,  has  appointed  an 
agent or where a credit servicer provides services. 

(11)  'consumer' means a consumer as defined in point (a) of Article 3 of Directive 

2008/48/EC. 

Title II 

Credit servicers  

Chapter I 

Authorisation of credit servicers 

Article 4 

General requirements 

1. 

Member  States  shall  require  a  credit  servicer  to  obtain  an  authorisation  in  a  home 
Member State before commencing its activities within its territory in accordance with 
the requirements set out in the national provisions transposing this Directive.  

EN 

31 

  EN 

 
2. 

1. 

2. 

1. 

2. 

Member  States  shall  confer  the  power  to  grant  such  authorisations  upon  the 
competent authorities designated pursuant to Article 20(3).  

Article 5 

Requirements for granting an authorisation 

Member  States  shall  lay  down  the  following  requirements  for  the  granting  of  an 
authorisation as referred to in Article 4(1): 

(a) 

the applicant is a citizen of the Union or a legal person as referred to in Article 
54 of the Treaty on the Functioning of the European Union; 

(b)  where  the  applicant  is  a  legal  person,  the  members  of  its  management  or 
administrative  organ  and  the  persons  who  hold  qualifying  holdings  in  the 
applicant, within the meaning of point (36) of Article 4(1) of Regulation (EU) 
No  575/2013,  or  where  the  applicant  is  a  natural  person,  shall  have  the 
following characteristics: 

(i) 

are of sufficiently good repute;  

(ii)  have a clean police record or other national equivalent in relation to 
serious criminal offences relating to property, to financial activities 
or to physical integrity;  

(iii)  are  not  currently  subject  to  any  insolvency  procedure  or  have 
previously been  declared bankrupt unless  reinstated in  accordance 
with national law; 

(c) 

(d) 

the  applicant  has  appropriate  governance  arrangements  and  internal  control 
mechanisms in place which ensure respect for borrower rights and compliance 
with personal data protection rules in accordance with the laws governing the 
credit agreement,  

the  applicant  applies  an  appropriate  policy  ensuring  the  fair  and  diligent 
treatment  of  the  borrowers,  including  by  taking  into  account  their  financial 
situation  and,  where  available,  the  need  for  such  borrowers  to  be  referred  to 
debt advice or social services; 

(e) 

the  applicant  has  adequate  and  specific  internal  procedures  in  place  which 
ensure the  recording and handling of borrower complaints.  

The  competent  authorities  of  the  home  Member  State  shall  refuse  an  authorisation 
referred  to  in  Article  4(1),  where  the  applicant  does  not  comply  with  the 
requirements set out in paragraph 1. 

Article 6 

Procedure for granting or refusing an authorisation 

Member  States  shall  establish  a  procedure  for  the  authorisation  of  credit  servicers 
which enables an applicant to submit an application and provide all the information 
necessary  for  the  competent  authority  of  the  home  Member  State  to  verify  that  the 
applicant  has  satisfied  all  the  conditions  laid  down  in  the  national  measures 
transposing Article 5(1).  

The application for authorisation, referred to in paragraph 1, shall be accompanied by 
the following:  

EN 

32 

  EN 

 
(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

evidence of the applicant’s legal status and its instrument of constitution, where 
appropriate; 

the address of the applicant’s head office or its registered office; 

the identity of the members of applicant's management or administrative organ 
who hold qualifying holdings within the meaning of point (36) of Article 4(1) 
of Regulation (EU) No 575/2013; 

evidence  that  the  applicant  and  the  persons  referred  to  in  point  (c)  of  this 
Article, comply with the conditions laid down in Article 5(1)(b); 

evidence  of  the  governance  arrangements  and  internal  control  mechanisms 
referred to in Article 5(1)(c); 

evidence of the policy referred to in Article 5(1)(d); 

evidence of the internal procedures referred to in Article 5(1)(e); 

any outsourcing agreement as referred to in Article 10(1). 

Member States shall ensure that the competent authorities of a home Member State 
assess,  within  20  working  days  of  receipt  of  the  application  for  authorisation, 
whether  that  application  is  complete.  Where  the  application  is  considered 
incomplete, the competent authorities shall set a deadline by which the applicant is to 
provide any further additional information and  they shall notify the applicant when 
they consider an application to be complete. 

Member  States  shall  ensure  that  competent  authorities  of  the  home  Member  State 
assess,  within  30  working  days  from  the  date  of  receipt  of  a  complete  application, 
whether  the  applicant  complies  with  the  national  provisions  transposing  this 
Directive. The competent authorities shall, on conclusion of that assessment, adopt a 
fully  reasoned  decision  either  granting  or  refusing  the  authorisation  which  shall  be 
notified to the applicant within five working days.  

Member States shall ensure that an applicant has the right of appeal before a tribunal 
either where the competent authorities of the home Member State decide to refuse an 
application for authorisation pursuant to Article 5(2) or where no decision is taken by 
the  competent  authorities  in  respect  of  an  application  for  authorisation,  within  six 
months of lodging a complete application.  

Article 7 

Withdrawal of authorisation 

Member States shall ensure that the competent authorities of the home Member State 
may  withdraw  the  authorisation  granted  to  a  credit  servicer,  where  such  a  credit 
servicer either: 

(a)  does not make use of the authorisation within 12 months of its grant; 

(b) 

expressly renounces the authorisation; 

(c)  has  ceased  to  engage  in  the  activities  of  a  credit  servicer  for  more  than  six 

months; 

(d)  has acquired an authorisation through false statements or other irregular means;  

(e)  no longer meets the conditions set out in Article 5(1); 

3. 

4. 

5. 

1. 

EN 

33 

  EN 

 
2. 

1. 

2. 

3. 

1. 

(f) 

commits  a  serious  breach  of  the  applicable  rules,  including  the  national  law 
provisions transposing this Directive. 

Where an authorisation is withdrawn in accordance with paragraph 1, Member States 
shall  ensure  that  the  competent  authorities  of  the  home  Member  State  shall 
immediately inform the competent authorities in the host Member States if the credit 
servicer provides services under Article 11. 

Article 8 

Register of authorised credit servicers  

Member  States  shall  ensure  that  competent  authorities  establish  and  maintain  a 
national  register  of  all  authorised  credit  servicers  authorised  to  provide  services 
within their territory, including credit servicers providing services under Article 11. 

The  register  shall  be  made  publicly  accessible  online  and  shall  be  updated  on  a 
regular basis.  

In case an authorisation has been withdrawn, the competent authorities shall update 
the register without delay. 

Article 9  

Contractual relationship between a credit servicer and a creditor 

Member States  shall ensure that a credit servicer provides its services in respect of 
the  management  and  enforcement  of  a  credit  agreement  on  the  basis  of  a  written 
agreement with a creditor. 

2. 

The agreement referred to in the paragraph 1 shall provide for the following: 

(a) 

(b) 

(c) 

(d) 

a  detailed  description  of  credit  servicing  activities  to  be  carried  out  by  the 
credit servicer;  

the level of remuneration of the credit servicer or how the remuneration is to be 
calculated; 

the extent to which the credit servicer can represent the creditor in relation to 
the borrower;  

an  undertaking  by  the  parties  to  comply  with  the  Union  and  national  law 
applicable to the credit agreement, including in respect of consumer protection. 

Member States shall ensure that the credit servicer keeps and maintains the following 
records for at least 10 years from the date of the contract referred to in paragraph 1: 

(a) 

(b) 

all correspondence with both the creditor and the borrower; 

all instructions received from the creditor in  respect  of each credit agreement 
that it manages and enforces on behalf of that creditor. 

Member States shall ensure that the credit servicer makes the records referred to in 
paragraph 3 available to competent authorities upon request. 

3. 

4. 

EN 

34 

  EN 

 
Article 10 

Outsourcing by a credit servicer 

1. 

Member States shall ensure that where a credit servicer uses a third party to perform 
activities  that  would  normally  be  undertaken  by  that  credit  servicer  ('credit  service 
provider'),  the  credit  servicer  remains  fully  responsible  for  complying  with  all 
obligations under the national provisions transposing this Directive. The outsourcing 
of those credit servicing activities shall be subject to the following conditions: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

the conclusion of a written outsourcing agreement between the credit servicer 
and  the  credit  service  provider  under  which  the  credit  service  provider  is 
obliged to comply with relevant Union or national law applicable to the credit 
agreement; 

the obligations of credit servicers under this Directive may not be delegated; 

the  contractual  relationship  and  obligations  of  the  credit  servicer  towards  its 
clients are not altered; 

the  conditions  for  the  authorisation  of  the  credit  servicer  as  set  out  in  Article 
5(1) are not affected; 

the outsourcing to the credit service provider does not prevent the supervision 
by competent authorities of a credit servicer in accordance with Articles 12 and 
20; 

the credit servicer has direct access to all relevant information concerning the 
outsourced services to the credit service provider; 

the credit servicer retains the expertise and resources to be able to provide the 
outsourced activities, after the outsourcing agreement is terminated. 

Member States shall ensure that the credit servicer keeps and maintains records of all 
instructions provided to the credit service provider for at least 10 years from the date 
of the contract referred to in paragraph 1. 

Member  States  shall  ensure  that  the  credit  servicer  and  the  credit  service  provider 
make  the  information  referred  to  in  paragraph  2  available  to  competent  authorities 
upon request. 

Chapter II 

Cross Border Credit Servicing 

Article 11 

Freedom to provide credit servicing activities in a host Member State 

Member States shall ensure that a credit servicer having obtained an authorisation in 
accordance  with  Article  5  in  a  home  Member  State  has  the  right  to  provide  in  the 
Union those services that are covered by that authorisation. 

Member  States  shall  ensure  that  where  the  credit  servicer  authorised  in  accordance 
with Article 5 in a home Member State intends to provide services in a host Member 
State,  it  shall  submit  to  the  competent  authority  of  the  home  Member  State  the 
following information: 

2. 

3. 

1. 

2. 

EN 

35 

  EN 

 
(a) 

the host Member State in which the credit servicer intends to provide services; 

(b)  where  applicable,  the  address  of  the  branch  established  in  the  host  Member 

State;  

(c)  where applicable, identity and address of an agent appointed in a host Member 

State; 

(d) 

(e) 

the  identity  of  the  persons  responsible  for  managing  the  provision  of  credit 
servicing activities in the host Member State; 

as  the  case  may  be,  details  of  the  measures  taken  to  adapt  the  internal 
procedures,  governance  arrangements  and  internal  control  mechanisms  to 
ensure compliance with the laws applicable to the credit agreement. 

The competent authorities of the home Member State shall, within 30 working days 
of  the  receipt  of  the  information  referred  to  in  paragraph  2,  communicate  that 
information  to  the  competent  authorities  of  the  host  Member  State  which  shall 
acknowledge  receipt  thereof  without  delay.  The  competent  authorities  of  the  home 
Member  State  shall  thereafter  inform  the  credit  servicer  of  such  confirmation  of 
receipt. 

Member  States  shall  ensure  that  a  credit  servicer  has  the  right  of  appeal  before  a 
tribunal  where  the  competent  authorities  of  the  home  Member  State  fail  to 
communicate the information. 

Member States shall ensure that once the competent authorities of a home Member 
State communicate the information referred to in paragraph 2, the credit servicer may 
start providing services in the host Member State from the earlier of the following: 

(a) 

(b) 

receipt  of  the  communication  from  the  competent  authorities  in  the  host 
Member  State  acknowledging  receipt  of  the  communication  referred  to  in 
paragraph 3; 

in the absence of any receipt of a communication referred to in point (a), after 
the expiry of two months  from the date of communication of the information 
referred to in paragraph 3. 

Member  States  shall  ensure  that  a  credit  servicer  shall  inform  the  competent 
authority  of  the  home  Member  State  of  change  subsequent  to  the  information 
communicated in accordance with paragraph 3 by means of the procedure set out in 
paragraphs 3 to 5.  

Member States shall ensure that the competent authorities of the host Member State 
record in the register referred to in Article 8 the credit servicers who are authorised to 
provide  credit  servicing  activities  in  their  territory  and  the  details  of  the  home 
Member State. 

Article 12 

Supervision of credit servicers who provide cross-border services 

Member States shall ensure that the competent authorities of the home Member State 
review  and  evaluate  the  ongoing  compliance  by  a  credit  servicer  who  provides 
services in a host Member State with the requirements of this Directive.  

Member States shall ensure that the competent authorities of a home Member State 
are  empowered  to  supervise,  investigate  and  impose  administrative  sanctions  or 

3. 

4. 

5. 

6. 

7. 

1. 

2. 

EN 

36 

  EN 

 
3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

penalties and remedial measures on credit servicers in respect of their activities in a 
host Member State.  

Member States shall ensure that the competent authorities of the home Member State 
will  communicate  the  measures  taken  in  respect  of  the  credit  servicer  to  the 
competent authorities of the host Member States.  

Member  States  shall  ensure  that  where  a  credit  servicer  which  is  domiciled  or 
established in a home Member State, has set up a branch or appointed an agent in a 
host  Member  State,  the  competent  authorities  of  the  home  Member  State  and  the 
competent  authorities  of  the  host  Member  State  shall  cooperate  closely  in  the 
performance of their functions and duties provided for in this Directive, in particular 
when carrying out checks, investigations and on-site inspections in that branch or in 
respect of that agent. 

Member States shall ensure that the competent authorities of the home Member State 
in  the exercise of their functions and duties provided for in this Directive shall  ask 
the  competent  authorities  of  the  host  Member  State  for  their  assistance  in  carrying 
out  an  on-site  inspection  of  a  branch  set  up  in  or  of  an  agent  appointed  in  a  host 
Member State.  

Member States shall further ensure that the competent authorities of the host Member 
State shall be entitled to decide on the most appropriate measures to be taken in each 
individual case in order to meet the request of assistance by the competent authorities 
of the home Member State.  

Where the competent authorities of the host Member State decides to conduct on-site 
inspections on behalf of the competent authorities of the home Member State,  they 
shall  inform  the  competent  authorities  of  the  home  Member  State  of  the  results 
thereof without delay. 

On  their  own  initiative,  the  competent  authorities  of  the  host  Member  State  may 
conduct checks, inspections and investigations in respect of credit servicing activities 
provided  within  their  territory  by  a  credit  servicer  authorised  in  a  home  Member 
State. The competent authorities of the host Member State shall provide the results of 
these checks, inspections and investigations to the competent authorities of the home 
Member State without delay. 

Member States shall ensure that where the competent authorities of the host Member 
State  have  evidence  that  a  credit  servicer  providing  services  within  its  territory,  in 
accordance with Article 11, is in breach of the obligations arising from the national 
provisions transposing this Directive, it shall transmit that evidence to the competent 
authorities  of  the  home  Member  State  and  request  that  they  take  appropriate 
measures. 

Member States shall ensure that the competent authorities of the home Member State 
communicate details of any administrative or other procedure initiated in respect of 
the evidence provided by the host Member State, or about sanctions or penalties and 
remedial  measures  taken  against  the  credit  servicer  or  a  reasoned  decision  why  no 
measures  were  taken,  to  the  competent  authorities  of  the  host  Member  State  who 
referred  the  evidence  no  later  than  two  months  from  the  request  referred  to  in 
paragraph 8. Where a procedure has been initiated, the competent authorities of the 
home  Member  State  shall  regularly  inform  the  competent  authorities  of  the  host 
Member State about its status. 

EN 

37 

  EN 

 
11. 

Member  States  shall  ensure  that  where,  after  having  informed  the  home  Member 
State  no  adequate  measures  were  taken  in  a  reasonable  time  or  despite  measures 
taken by the competent authorities of the home Member State or in an urgent case, 
the credit servicer continues to be in breach of the obligations under this Directive, 
the  competent  authorities  of  the  host  Member  State  are  entitled  to  take  appropriate 
administrative  sanctions  or  penalties  and  remedial  measures  in  order  to  ensure 
compliance with  the provisions of this Directive within its territory  after informing 
without delay the competent authorities of the home Member State. 

Title III 

Credit purchasers 

Article 13 

1. 

2. 

3. 

4. 

1. 

39 

Right to information regarding the credit agreement 

Member States shall ensure that a creditor shall provide all necessary information to 
a  credit  purchaser  to  enable  that  credit  purchaser  assess  the  value  of  the  credit 
agreement  and  the  likelihood  of  recovery  of  the  value  of  that  agreement  prior  to 
entering into a contract for the transfer of that credit agreement. 

Member  States  shall  require  a  credit  institution  or  the  subsidiary  of  a  credit 
institution  that  transfers  a  credit  agreement  to  a  credit  purchaser  to  inform  the 
competent  authorities  designated  in  accordance  with  Article  20(3)  of  this  Directive 
and Article 4 of Directive 2013/36/EU39 of the following: 

(a) 

(b) 

(c) 

the  type  of  asset  securing  the  credit  agreement,  including  information  on 
whether it is a credit agreement concluded with consumers;  

the value of the credit agreement; 

the identity and address of the borrower and of the credit purchaser and, where 
applicable, of its representative designated in accordance with Article 17. 

The  competent  authorities  referred  to  in  paragraph  2  shall  communicate  without 
delay  the  information  referred  to  in  that  paragraph  and  any  other  information  that 
they  might  consider  to  be  necessary  for  carrying  out  their  task  according  to  this 
Directive  to  the  competent  authorities  of  the  Member  State  where  the  credit 
purchaser  or  its  representative,  designated  in  accordance  with  Article  17,  is 
established and of the Member State where the borrower is established or resident. 

The provisions laid down in paragraphs 1,2 and 3 shall be applied in accordance with 
Regulation (EU) 2016/679 and Regulation (EC) No 45/2001. 

Article 14 

Technical standards for NPL data 

EBA shall develop draft implementing technical standards that specify the formats to 
be used by creditors who are credit institutions for the provision of information as set 

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity of credit institutions and the prudential supervision of credit institutions and investment firms, 
amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC  (OJ  L  176, 
27.6.2013, p. 338). 

EN 

38 

  EN 

 
                                                 
out in Article 13(1), in order to provide detailed information on their credit exposures 
in  the  banking  book  to  credit  purchasers  for  the  screening,  financial  due  diligence 
and valuation of the credit agreement. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
by [31 December 2018].  

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the paragraph 1, in accordance with Article 15 of Regulation (EU) No 
1093/2010 of the European Parliament and of the Council40. 

Article 15 

Obligations of credit purchasers 

Member States shall ensure that the representative of a credit purchaser referred to in 
Article  17(1)  appoints  a  credit  institution  established  in  the  Union  or  its  subsidiary 
established in the Union or an authorised credit servicer to perform credit servicing 
activities in respect of credit agreements concluded with consumers. 

Member  States  shall  ensure  that  a  credit  purchaser  is  not  subject  to  any  additional 
requirements for the purchase of credit agreements other than as provided for by the 
national measures transposing this Directive. 

Article 16 

Use of credit servicers, credit institutions or their subsidiaries 

Member  States  shall  require  the  credit  purchaser  or,  where  applicable,  their 
representative  designated  in  accordance  with  Article  17,  to  inform  the  competent 
authorities of the Member State where the credit purchaser or their representative is 
domiciled  or  established  of  the  identity  and  address  of  the  credit  institution,  its 
subsidiary  or  the  credit  servicer  that  they  have  engaged  to  perform  credit  servicing 
activities in relation to the transferred credit agreement. 

Where  the  credit  purchaser  or  the  representative  designated  in  accordance  with 
Article 17 engages a different credit institution or subsidiary to service the credit or a 
different  credit  servicer,  it  shall  notify  the  competent  authorities  referred  to  in 
paragraph 1 thereof at least two weeks in advance of that change and shall indicate 
the identity and address of the new credit institution, its subsidiary or credit servicer 
that  they  have  engaged  to  perform  credit  servicing  activities  in  relation  to  the 
transferred credit agreement. 

Member States shall require the competent authorities of the Member State where the 
credit purchaser or, where applicable, their representative designated, in accordance 
with  Article  17,  is  domiciled  or  established  to  transmit  without  undue  delay  to  the 
competent  authorities  responsible  for  the  supervision  of  the  credit  institution,  its 
subsidiary  or  credit  servicer  referred  to  in  the  paragraphs  1  and  2,  the  information 
received in accordance with Article 13(3). 

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Banking Authority), amending Decision No 
716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). 

2. 

3. 

1. 

2. 

1. 

2. 

3. 

40 

EN 

39 

  EN 

 
                                                 
1. 

2. 

1. 

2. 

1. 

2. 

Article 17 

Representative of credit purchasers not established in the Union 

Member  States  shall  provide  that  where  a  transfer  of  the  credit  agreement  is 
concluded,  a  credit  purchaser  that  is  not  domiciled  or  established  in  the  Union  has 
designated in writing a representative who is domiciled or established in the Union. 

The  representative  referred  to  in  paragraph  1  shall  be  addressed  in  addition  to  or 
instead  of  the  credit  purchaser  by  competent  authorities  on  all  issues  related  to  the 
ongoing compliance with this Directive and be fully responsible for compliance with 
the  obligations  imposed  on  the  credit  purchaser  under  the  national  provisions 
transposing this Directive. 

Article 18 

Credit purchasers directly enforcing a credit agreement 

Member  States  shall  ensure  that  a  credit  purchaser  or,  where  applicable,  its 
representative  designated  in  accordance  with  Article  17,  communicates  to  the 
competent  authorities  of  the  Member  State  where  the  credit  purchaser  or,  where 
applicable  its  representative  is  domiciled  or  established  that  it  intends  to  directly 
enforce a credit agreement by providing the following information: 

(a) 

(b) 

(c) 

the  type  of  asset  securing  the  credit  agreement,  including  information  on 
whether it is a credit agreement concluded with consumers;  

the value of the credit agreement; 

the  identity  and  address  of  the  borrower  and  of  the  credit  purchaser  or  of  its 
representative designated in accordance with Article 17. 

Member States shall require the competent authorities referred to in paragraph 1, to 
transmit without undue delay the information received in accordance with paragraph 
1  to  the  competent  authorities  of  the  Member  State  where  the  borrower  is 
established. 

Article 19 

Transfer of a credit agreement by a credit purchaser 

Member  States  shall  require  a  credit  purchaser  or,  where  applicable, 
its 
representative  designated  in  accordance  with  Article  17,  that  transfers  a  credit 
agreement to another credit purchaser to inform the competent authorities referred to 
in Article 18(1) of the transfer, the identity and address of the new credit purchaser 
and, where applicable, its representative designated in accordance with Article 17. 

Member States shall ensure that the competent authorities referred to in paragraph 1 
shall  transmit  without  undue  delay  the  information  received  in  accordance  with 
Article 13(3) to the competent authorities of the Member State where the new credit 
purchaser and, where applicable, its representative is domiciled or established. 

EN 

40 

  EN 

 
TITLE IV 

Supervision  

Article 20 

1. 

2. 

3. 

4. 

5. 

6. 

1. 

Supervision by competent authorities 

Member States shall ensure that credit servicers and, where applicable, credit service 
providers  to  whom  activities  have  been  outsourced  in  accordance  with  Article  10, 
comply with the national provisions transposing this Directive on an on-going basis 
and  shall  ensure  that  those  activities  are  subject  to  adequate  supervision  by  the 
competent authorities of the home Member State in order to assess such compliance. 

The  Member  State  where  the  credit  purchasers  or,  where  applicable,  their 
representative  designated  in  accordance  to  Article  17,  are  domiciled  or  established 
shall ensure that the competent authorities referred to in paragraph 1 are responsible 
for  the  supervision  of  the  obligations  set  in  Articles  15-19  in  respect  of  credit 
purchasers  or,  where  applicable  their  representatives  designated  in  accordance  to 
Article 17. 

Member States shall designate the competent authorities responsible for carrying out 
the functions and duties under the national provisions transposing this Directive. 

Where  Member  States  designate  more  than  one  competent  authority  pursuant  to 
paragraph 3, they shall determine their respective tasks.  

Member  States  shall  ensure  that  appropriate  measures  are  in  place  to  enable  the 
competent  authorities  designated  pursuant  to  paragraph  3  to  obtain  from  credit 
purchasers or their representatives, credit servicers, credit service providers to whom 
a  credit  servicer  outsources  activities  under  Article  10,  borrowers  and  any  other 
persons or public authority the information necessary to carry out the following:  

(a) 

(b) 

(c) 

assess the ongoing compliance with the requirements laid down in the national 
provisions transposing this Directive;  

investigate possible breaches of those requirements;  

impose administrative penalties and remedial measures in accordance with the 
provisions transposing Article 22. 

Member  States  shall  ensure  that  the  competent  authorities  designated  pursuant  to 
paragraph  3,  have  the  expertise,  resources,  operational  capacity  and  powers 
necessary for the exercise of their functions and duties laid down in this Directive. 

Article 21 

Supervisory role and powers of competent authorities  

Member  States  shall  ensure  that  competent  authorities  of  the  home  Member  State 
designated  pursuant  to  Article  20(3),  are  given  all  supervisory,  investigatory  and 
sanctioning powers necessary for the exercise of their functions and duties laid down 
in this Directive, including the following: 

(a) 

the power to grant or refuse an authorisation pursuant to Article 5; 

EN 

41 

  EN 

 
(b) 

(c) 

(d) 

(e) 

the power to withdraw an authorisation pursuant to Article 7; 

the power to conduct on-site and off-site inspections; 

the  power  to  impose  administrative  sanctions  or  penalties  and  remedial 
measures in accordance with the provisions transposing Article 22; 

the  power  to  review  outsourcing  agreements  entered  into  by  credit  servicers 
with credit service providers in accordance with Article 10(1). 

Member States shall ensure that the competent authorities of the home Member State 
evaluate,  at  least  once  a  year,  the  implementation  by  a  credit  servicer  of  the 
requirements set in points (c) (d) and (e) of Article 5(1). 

Member States shall determine the extent of the evaluation referred to in paragraph 
2,  having  regard  to  the  size,  nature,  scale  and  complexity  of  the  activities  of  the 
credit servicer concerned.  

The  competent  authorities  of  the  home  Member  State  shall  regularly,  and  at  least 
once a year, inform the competent authorities of host Member States of the results of 
the  evaluation  referred  to  in  paragraph 2,  including  details  of  any  administrative 
penalties or remedial measures taken. 

Member  States  shall  ensure  that  when  carrying  out  the  evaluation  referred  to  in 
paragraph  2,  the  competent  authorities  of  the  home  and  host  Member  States 
exchange all information necessary to enable them to carry out their respective tasks 
laid down in this Directive. 

Member States shall ensure that the competent authority of the home Member State 
is  able to  require a  credit servicer, credit  service provider or credit purchaser or its 
representative  appointed  in  accordance  with  Article  17  that  does  not  meet  the 
requirements of the national provisions transposing this Directive to take at an early 
stage, all necessary actions or steps in order to comply with those provisions. 

Article 22 

2. 

3. 

4. 

5. 

6. 

Administrative penalties and remedial measures 

1. 

Member States shall lay down rules establishing appropriate administrative penalties 
and remedial measures applicable in at least the following situations: 

(a) 

(b) 

(c) 

(d) 

a credit servicer fails to enter or enters into an outsourcing agreement in breach 
of the provisions transposing Article 10 or the credit service provider to whom 
the functions were outsourced commits a serious breach of the applicable legal 
rules, including the national law transposing this Directive; 

a  credit  servicer's  governance  arrangements  and  internal  control  mechanisms 
fail  to  ensure  respect  for  borrower  rights  and  compliance  with  personal  data 
protection rules; 

a credit servicer's policy is inadequate for the proper treatment of borrowers as 
set in Article 5(1)(d); 

a  credit  servicer's  internal  procedures  fail  to  provide  for  the  recording  and 
handling of borrower complaints according to the obligations set in the national 
measures transposing this directive; 

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(e) 

(f) 

a  credit  purchaser  or,  where  applicable,  its  representative  designated  in 
accordance with Article 17 fails to communicate the information provided for 
by national measures transposing Article 16, 18 and 19; 

a  credit  purchaser  or,  where  applicable,  its  representative  designated  in 
accordance with Article 17 fails to comply with the requirement of the national 
measures transposing Article 15; 

(g) 

a  credit  purchaser  fails  to  comply  with  the  requirement  of  the  national 
measures transposing Article 17. 

2. 

The  penalties  and  measures  referred  to  in  paragraph  1  shall  be  effective, 
proportionate and dissuasive and shall include at least the following: 

(a) 

(b) 

a cancellation of an authorisation to carry out activities as a credit servicer; 

an order requiring the credit servicer or credit purchaser or, where applicable, 
its  representative  designated  in  accordance  with  Article  17  to  remedy  the 
breach, and to cease the conduct and to desist from a repetition of that conduct; 

(c) 

administrative pecuniary penalties. 

3. 

4. 

Member States shall also ensure that administrative penalties and remedial measures 
are effectively implemented. 

Member  States  shall  ensure  that  when  determining  the  type  of  administrative 
penalties  or  other  remedial  measures  and  the  amount  of  those  administrative 
pecuniary  penalties  that  competent  authorities  take  into  account  all  the  following 
circumstances, where relevant: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

the gravity and the duration of the breach; 

the degree of responsibility of the credit servicer or credit purchaser or, where 
applicable,  its  representative  designated  in  accordance  with  Article  17, 
responsible for the breach; 

the financial strength of the credit servicer or credit purchaser responsible for 
the breach, including by reference to the total turnover of a legal person or the 
annual income of a natural person; 

the importance of profits gained or losses avoided because of the breach by the 
credit  servicer  or  credit  purchaser  or,  where  applicable,  its  representative 
designated in accordance with Article 17, responsible for the breach, insofar as 
they can be determined; 

the losses caused to third parties by the breach, insofar as those losses can be 
determined; 

the  level  of  cooperation  by  the  credit  servicer  or  credit  purchaser  responsible 
for the breach with the competent authorities; 

(g)  previous  breaches  by  the  credit  servicer  or  credit  purchaser  or,  where 
applicable,  its  representative  designated  in  accordance  with  Article  17, 
responsible for the breach; 

(h) 

any actual or potential systemic consequences of the breach. 

5. 

Where the situations referred to in paragraph 1 apply to legal persons, Member States 
shall  also  ensure  that  competent  authorities  apply  the  administrative  penalties  and 
remedial  measures  set  out  in  paragraph  2  to  members  of  the  management  or 

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6. 

7. 

administrative organ, and to other individuals who under national law are responsible 
for the breach. 

Member States shall ensure that before taking any decision imposing administrative 
penalties or remedial measures set out in paragraph 2 of this Article, the competent 
authorities give the concerned credit servicer, credit purchaser or  where applicable, 
its  representative  designated  in  accordance  with  Article  17,  the  opportunity  to  be 
heard. 

Member  States  shall  ensure  that  any  decision  imposing  administrative  sanctions  or 
remedial measures as set out in paragraph 2 is properly reasoned and is subject to the 
right of appeal. 

TITLE V 

Accelerated Extrajudicial Collateral Enforcement 

Article 23 

Conditions for the voluntary use of Accelerated Extrajudicial Collateral Enforcement 

1. 

Member States shall ensure that this accelerated extrajudicial collateral enforcement 
mechanism may be exercised by a creditor where all of the following conditions are 
fulfilled: 

(a) 

the  mechanism  has  been  agreed  in  writing,  or  in  a  notarised  format  if  so 
provided by the Member State, by the creditor and business borrower and that 
agreement specifies the enforcement event and the period of time in which the 
business borrower may execute payment following that event in order to avert 
the execution of this accelerated extrajudicial collateral enforcement; 

(b) 

the  business  borrower  has  been  clearly  informed  about  the  application  and 
consequences  of  this  accelerated  extrajudicial  collateral  enforcement  prior  to 
the conclusion of the agreement referred to in point (a); 

(c)  within 4 weeks of the enforcement event, or such later point in time where so 
negotiated by the creditor and the business borrower, the creditor has notified 
the business borrower, in writing, of all of the following: 

(i) 

(ii) 

(iii) 

the creditor's intention to realise the assets through this accelerated 
extrajudicial  collateral  enforcement  mechanism  to  satisfy  the 
contractual obligations of the secured credit agreement; 

the  type  of  enforcement  measure  to  be  applied  as  referred  to  in 
Articles 25 and 26; 

the time period for the execution of payment before the use of the 
accelerated  extrajudicial  collateral  enforcement  mechanism 
referred to in point (a); 

(iv) 

the default amount of the secured credit agreement due pursuant to 
the contractual obligations of the secured credit agreement; 

(d) 

the  business  borrower  has  not  executed  the  full  payment  as  stipulated  in  the 
creditor's notification referred to in point (c). 

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For the purposes of paragraph 1, the agreement referred to in paragraph 1(a) shall include a 
directly enforceable title. 

For  the  purposes  of  paragraph  1(a),  Member  States  may  establish  that  in  cases  where  a 
business borrower has paid at  least 85%  of the amount  of the secured credit agreement, the 
period referred to therein may be extended by at least six months.  

2. 

3. 

1. 

2. 

3. 

4. 

Member States shall ensure that the business borrower is not permitted to dispose of 
the  assets  pledged  as  collateral  as  of  receipt  of  the  notification  referred  to  in 
paragraph 1(c) and is subject to a general duty to cooperate and to furnish all relevant 
information where this accelerated extrajudicial collateral enforcement mechanism is 
exercisable in accordance with paragraph 1. 

Member  States  shall  ensure  that  the  creditor  affords  the  business  borrower  a 
reasonable period of time for execution of payment and makes reasonable efforts to 
avoid the use of this accelerated extrajudicial collateral enforcement mechanism. 

Article 24 

Enforcement 

Member  States  shall  ensure  that  collateral  may  be  realised  pursuant  to  this 
accelerated extrajudicial collateral enforcement mechanism. 

Member States shall provide for at least one or both of the following means to realise 
the  collateral  as  referred  to  in  paragraph  1  for  each  type  of  security  right  and 
collateral: 

(a)   public auction; 

(b)   private sale. 

For each of these means, Member States may provide that a notary, bailiff or other 
public  official  is  appointed  where  appropriate  to  ensure  an  efficient  and  expedited 
distribution of sale proceeds and transfer of the collateral to an acquirer, or safeguard 
the borrower's rights. 

Where Member States establish the extrajudicial enforcement procedure by means of 
appropriation, the right of the creditor to retain the asset in or towards satisfaction of 
business  borrower's  liability  shall  be  governed  by  the  applicable  laws  in  each 
Member  State.  Member  States  shall  ensure  that  in  the  case  of  appropriation  the 
positive  difference  to  be  paid  out  to  the  business  borrower  shall  be  the  difference 
between  sum  outstanding  of  the  secured  credit  agreement  and  the  valuation  of  the 
asset. 

For  the  purposes  of  the  realisation  referred  to  in  paragraph  2,  Member  States  shall 
ensure that the creditor organises a valuation of the assets, in order to determine the 
reserve  price  in  cases  of  public  auction  and  private  sale,  and  that  the  following 
conditions are met: 

(a) 

(b) 

(c) 

the creditor and the business borrower agree on the valuer to be appointed; 

the valuation is conducted by an independent valuer; 

the valuation is fair and realistic; 

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(d) 

(e) 

the valuation is conducted specifically for the purposes of the realisation of the 
collateral after the enforcement event; 

the business borrower has the right to challenge the valuation before a court in 
accordance with Article 29.  

5. 

For the purposes of point (a), where the parties cannot agree upon the appointment of 
a  valuer  for  the  purposes  of  realising  the  collateral  referred  to  in  paragraph  2,  a 
valuer  shall  be  appointed  by  a  decision  of  a  judicial  court,  in  accordance  with  the 
national law of the Member State in which the business borrower is established or is 
domiciled. 

Article 25 

Public auction 

1. 

Member  States  shall  ensure  that  the  realisation  of  collateral  by  means  of  public 
auction is conducted in accordance with the following elements: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

the creditor has publicly communicated the time and place of the public auction 
at least 10 days prior to that auction; 

the  creditor  has  made  reasonable  efforts  to  attract  the  highest  number  of 
potential buyers; 

the  creditor  has  notified  the  business  borrower,  and  any  third  party  with  an 
interest  in  or  right  to  the  asset,  of  the  public  auction,  including  its  time  and 
place, at least 10 days prior to that auction; 

a valuation of the asset has been conducted prior to the public auction; 

the  reserve  price  of  the  asset  is  at  least  equal  to  the  valuation  amount 
determined prior to the public auction; 

the  asset  may  be  sold  at  a  reduction  of  no  more  than  20%  of  the  valuation 
amount where both of the following apply: 

(i) 

no buyer has made an offer in line with the requirements referred to 
in points (e) and (f) at the public auction; 

(ii) 

there is a threat of imminent deterioration of the asset. 

2. 

3. 

Where the asset has not been sold by public auction, Member States may provide for 
the realisation of the collateral by private sale. 

Where  a  Member  State  provides  for  a  second  public  auction,  points  (a)  to  (e)  of 
paragraph  1  shall  apply  but  the  asset  may  be  sold  at  a  further  reduction,  as 
determined by Member States. 

Article 26 

Private sale  

1. 

Member States shall ensure that the realisation of collateral by means of private sale 
is conducted in accordance with the following elements: 

(a) 

the creditor has made reasonable efforts, including adequate public advertising, 
to attract potential buyers; 

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(b) 

(c) 

(d) 

the  creditor  has  notified  the  business  borrower,  and  any  relevant  third  party 
with an interest in or right to the asset, of its intention to sell the asset at least 
10 days prior to offering the asset for sale; 

a valuation of the asset has been conducted prior to the private sale, and or a 
public auction in accordance with point (c) of Article 25(1); 

the  guide  price  of  the  asset  is  at  least  equal  to  the  amount  established  in  the 
valuation  referred  to  in  point  (c),  at  the  time  of  offering  the  asset  for  private 
sale; 

(e) 

the asset may be sold at a reduction of no more than 20% of value where both 
of the following apply: 

(i) 

no buyer has made an offer in line with the requirements referred to 
in points (d) and (e)  within 30 days; 

(ii) 

there is a threat of imminent deterioration of the asset. 

2. 

3. 

Where the asset has not been sold by private sale within 30 days of offering the asset 
for sale, Member States shall ensure that the creditor publicly advertises the sale for 
an additional period of at least 30 days before concluding any sale.  

Where a Member State provides for a second attempt at private sale, points (a) to (d) 
of  paragraph  1  shall  apply  but  the  asset  may  be  sold  at  a  further  reduction,  as 
determined by Member States. 

Article 27 

Competing security rights  

Member States shall provide that the priority attached to competing security rights in the same 
collateral is not affected by the enforcement of one of those rights by means of the national 
provisions transposing this Directive.   

Article 28 

Right to challenge the enforcement 

Member  States  shall  ensure  that  the business  borrower  has  the  right  to  challenge  the  use  of 
this accelerated extrajudicial collateral enforcement mechanism before a national court where 
the  sale  of  the  assets  provided  as  collateral  has  not  been  conducted  in  accordance  with  the 
national  provisions  transposing  Articles  24(3),  25  and  26,  or  the  valuation  of  the  assets  has 
not been conducted in accordance with the national provisions transposing Article 24(4). 

Article 29 

Restitution of the exceeding amount  

Member  States  shall  ensure  that  the  creditor  is  required  to  pay  the  business  borrower  any 
positive  difference  between  the  sum  outstanding  of  the  secured  credit  agreement  and  the 
proceeds of the sale of the asset. 

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Article 30 

Settlement of the outstanding amount 

Without  prejudice  to  articles  19  to  23  of  the  Directive  (EU)  20XX/XX  of  the  European 
Parliament  and  of  the  Council41,  in  cases  where  the  amount  realised  after  the  use  of  this 
accelerated extrajudicial collateral enforcement mechanism is an amount lower than the sum 
outstanding of the secured credit agreement, Member States may provide for the settlement of 
all liabilities under that agreement, in accordance with applicable national laws. 

Article 31 

Transfer of secured credit agreements to third parties 

Member  States  shall  ensure  that  where  a  secured  credit  agreement  which  provides  for  the 
right  to  use  accelerated  extrajudicial  collateral  enforcement  is  transferred  by  the  credit 
institution or its subsidiary to any third party, that third party shall acquire the right to use this 
accelerated extrajudicial collateral enforcement mechanism in case of the business borrower's 
default under the same terms and conditions as the credit institution. 

Article 32 

Restructuring and insolvency proceedings 

This  Directive  shall  be  without  prejudice  to  the  Directive  (EU)  20XX/XX  of  the 
European Parliament and of the Council42. 

Member States shall ensure that where insolvency proceedings are initiated in respect 
of  a  business  borrower,  the  realisation  of  collateral  pursuant  to  national  laws 
transposing  this  Directive  is  subject  to  a  stay  of  individual  enforcement  actions  in 
accordance with applicable national laws. 

Article 33 

Data collection 

Member  States  and,  in  the  case  of  credit  institutions  competent  authorities  which 
supervise  credit  institutions,  shall,  on  an  annual  basis,  collect  information  from 
creditors on the number of secured credit agreements which are enforced through this 
accelerated  extrajudicial  collateral  enforcement  and  the  timeframes  for  such 
enforcement. 

Member  States  and,  in  the  case  of  credit  institutions,  competent  authorities  which 
supervise  credit  institutions,  shall,  on  an  annual  basis,  collect  the  following 
information from creditors: 

Directive (EU) …/…. of the European Parliament and of the Council of […] on preventive restructuring 
frameworks,  second  chance  and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and 
discharge procedures and amending Directive 2012/30/EU (OJ L […], […], p. […]). 
Directive (EU) …/…. of the European Parliament and of the Council of […] on preventive restructuring 
frameworks,  second  chance  and  measures  to  increase  the  efficiency  of  restructuring,  insolvency  and 
discharge procedures and amending Directive 2012/30/EU (OJ L […], […], p. […]). 

1. 

2. 

1. 

2. 

41 

42 

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(a)  

the number of proceedings pursuant to the national provisions 
transposing this Directive initiated, pending and realised, including:  

(i) the number of proceedings in respect of movable assets,  
(ii) the number of proceedings in respect of immovable assets. 
the length of the proceedings from notification to settlement, arranged 
by means of realisation (public sale, private sale, or appropriation); 
the average costs of each proceedings, in EUR; 
the settlement rates.  

(b)  

(c)  
(d)  

3. 

4. 

Member  States  shall  aggregate  the  data  referred  to  in  paragraph  2  and  compile 
statistics  from  that  aggregate  data  for  the  full  calendar  year  beginning  DATE  [OP: 
Please insert a date of the January 1 following adoption of this act]. 

The  statistics  referred  to  in  the  first  subparagraph  shall  be  communicated  to  the 
Commission  on  annual  basis  and  by  31  March  of  the  calendar  year  following  the 
year for which data is collected. 

TITLE VI 

Safeguards and duty to cooperate 

Article 34  

Modification of the credit agreement 

Without  prejudice  to  the  obligations  to  inform  the  consumer  pursuant  to  Directive 
2014/17/EU,  Directive  2008/48/EC  and  Directive  93/13/EEC,  Member  States  shall 
ensure that prior to modifying the terms and conditions of a credit agreement either 
by  consent  or  by  operation  of  law,  the  creditor  communicates  the  following 
information to the consumer:  

(a) 

(b) 

(c) 

(d) 

(e) 

a clear and comprehensive description of the proposed changes; 

the timescale for the implementation of those changes; 

the  grounds  of  complaint  available  to  the  consumer  regarding  those 
modifications; 

the time period available for lodging any such complaint; 

the  name  and  address  of  the  competent  authority  where  that  complaint 
may be submitted. 

Article 35 

Complaints 

1. 

Member States shall ensure that  a  credit servicer communicates,  without delay,  the 
following information to the borrower: 

(a) 

(b) 

(c) 

the identity of the credit servicer; 

a copy of its authorisation granted pursuant to Article 6; 

the  name,  address  and  contact  details  of  the  competent  authorities  of  the 
Member  State  where  the  borrower  is  domiciled  or  established  and  where  the 
borrower may submit a complaint. 

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2. 

3. 

4. 

5. 

6. 

1. 

2. 

3. 

4. 

5. 

The  communication  referred  to  in  paragraph  1  shall  be  in  writing,  or  by  electronic 
means where permitted under Union or national law. 

Member  States  shall  ensure  that,  in  all  subsequent  communications  with  the 
borrower as well as in any communication by phone, the credit servicer includes or 
states the information listed in points (a) and (c) of paragraph 1. 

Member States shall ensure that credit servicers establish and maintain effective and 
transparent procedures for the handling of complaints received from borrowers.  

Member States shall ensure that the treatment by credit servicers of complaints from 
borrowers  is  free  of  charge  and  that  credit  servicers  record  the  complaints  and 
measures taken to address them. 

Member  States  shall  ensure  that  the  competent  authorities  establish  and  publish  a 
procedure for the handling of complaints by borrowers concerning credit purchasers, 
credit  servicers  and  credit  service  providers  and  to  ensure  that  they  are  treated 
promptly when received. 

Article 36  

Personal data protection 

The provision of information to individuals about the processing of personal data and 
the processing of such personal data and any other processing of personal data for the 
purposes  of  this  Directive  shall  be  carried  out  in  accordance  with  Regulation  (EU) 
2016/679 and with Regulation (EC) No 45/2001. 

Article 37  

Cooperation between competent authorities 

Member  States  shall  ensure  that  the competent  authorities  referred  to  in Articles  7, 
11, 12, 13, 16, 18, 19 and 21 shall cooperate with each other whenever necessary for 
the  purpose  of  carrying  out  their  duties  or  of  exercising  their  powers  under  the 
national provisions transposing this Directive. Those authorities shall also coordinate 
their  actions  in  order  to  avoid  possible  duplication  and  overlap  when  applying 
supervisory powers and administrative penalties and measures to cross-border cases. 

Member States shall ensure that competent authorities shall, on request and without 
undue  delay,  provide  each  other  with  the  information  required  for  the  purposes  of 
carrying out their functions and duties under the national provisions transposing this 
Directive. 

Member  States  shall  ensure  that  competent  authorities  receiving  confidential 
information in the exercise of their functions and duties under this Directive shall use 
that information only in the course of their functions and duties. 

Member  States  shall  take  the  necessary  administrative  and  organisational  measures 
to facilitate the cooperation provided for in this Article. 

The  European  Banking  Authority  shall  facilitate  the  exchange  of  information 
between competent authorities in the Member States and promote their cooperation. 

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Title VII 

Amendment 

Article 38 

The following Article 28a is inserted: 

Amendment to Directive 2014/17/EU 

"Article 28a 

1. 

In  the event of an  assignment to  a third party of the creditor's rights  under a credit 
agreement or of the agreement itself, the consumer shall be entitled to plead against 
the assignee any defence which was available to him as against the original creditor, 
including set-off where the latter is permitted in the Member State concerned. 

2. 

The consumer shall be informed of the assignment referred to in paragraph 1." 

Title VIII 

Final provisions 

Article 39 

Committee  

1. 

2. 

1. 

2. 

43 

The  Commission  shall  be  assisted  by  a  committee.  That  committee  shall  be  a 
committee  within  the  meaning  of  Regulation  (EU)  No  182/2011  of  the  European 
Parliament and of the Council43.  

Where reference is made to this paragraph, Article 4 of Regulation (EU) No 182/2011 
shall apply. 

Article 40 

Evaluation 

Five years after the entry into force of this Directive, the Commission shall carry out 
an  evaluation  of  this  Directive  and  present  a  Report  on  the  main  findings  to  the 
European  Parliament,  the  Council  and  the  European  Economic  and  Social 
Committee. 

Where  the  evaluation  identifies  important  problems  with  the  functioning  of  the 
Directive, the Report should outline how the Commission is intending to address the 
identified problems, including steps and timings of the potential revision. 

Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16  February  2011 
laying down the rules and general principles concerning mechanisms for control by Member States of 
the Commission’s exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 

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Article 41 

Transposition 

1. 

2. 

3. 

4. 

Member States shall adopt and publish, by 31 December 2020 at the latest, the laws, 
regulations  and  administrative  provisions  necessary  to  comply  with  this  Directive. 
They shall forthwith communicate to the Commission the text of those provisions. 

They shall apply those provisions from 1 January 2021.  

However, Articles 4(1), 7, 9 to 12 shall apply from 1 July 2021. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

Article 42 

Entry into force 
This  Directive  shall  enter  into  force  on  the  20th  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

Article 43 

Addressees 

This Directive is addressed to the Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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