Eight specific changes in favor of borrowers and consumers are implemented with the passing of the “red” loans bill entitled “Loans: Transparency, competition, protection of the vulnerable – Incorporation of Directive (EU) 2021/2167, re-introduction of “HERAKLES” program, which was voted today in the Parliament.
According to an announcement by the Ministry of National Economy and Finance, these are regulations that strengthen protection for the truly vulnerable, impose transparency and information obligations on servicers with severe penalties for those who violate them, strengthen competition in the banking system, reduce the cost of use banking services for consumers, the reduction of non-performing loans is accelerated.
In particular, arrangements that improve the position of borrowers and consumers include the following:
1. New strict transparency obligations, to better inform borrowers.
It is mandatory for the servicers to provide personalized and detailed information to the debtors, about the amount of the debt, the history of payments, the installments, the interest rate of the arrangement, etc.
The information will be provided through a special digital platform (analogous to banks’ web banking) that will be updated at least on a monthly basis and which must be operational by March 31, 2024 at the latest. The penalties for those who do not comply with the new framework include fines of up to 500,000 euros up to and including revocation of the operating license.
2. Improvement of the extrajudicial mechanism and special care for the vulnerable.
The debt restructuring proposal of vulnerable debtors resulting from the application of the out-of-court algorithm will be automatically and mandatorily accepted by all creditors. Thus, the ability of servicers that existed until now to reject the out-of-court proposal even with the simple “no” of an employee is abolished.
The debtor reserves the right to reject the proposal, while the creditors will be able to challenge it in the courts, only if they have evidence that parameters of the application are not true. In this way, protection for the vulnerable is shielded and, at the same time, safeguards are put in place to identify those who are truly vulnerable and not defaulters.
In addition, for the cases of non-vulnerables for whom an auction program has been issued, a limit of up to 10% of the debt is placed on the amount of the advance that creditors can request in order to agree to an out-of-court settlement and thus suspend the auction.
In addition, for all debtors who have secured loans (not only for the vulnerable), the algorithm from which the amount of the write-off and the debt is obtained through the out-of-court settlement is improved. The regulation in question, which will be established by Ministerial Decision immediately after the passing of the bill, leads to a reduction of up to 28% of the regulated debt from collateralized loans. In the same way (Ministerial Decision) the interest rate of the arrangements will be set at 3% fixed for 3 years.
3. Enhancing competition, by granting loans from non-bank institutions.
The Credit Companies (whose operation is already allowed in our country), in addition to loans to natural persons to cover consumer and personal needs, will henceforth be able to grant housing loans as well as specific categories of business loans.
In this way, the competition in the provision of credits is intensified, the refinancing of loans is facilitated and the access to financing for natural and legal persons excluded from the banking system. Credit Companies are active in all EU countries and in our country they operate under the supervision of the Bank of Greece.
4. Expansion of transactions implemented through the direct payment system (IRIS).
Freelancers and self-employed persons are required to link their business account to a direct payment system, as well as to accept direct payment from any natural person who requests it.
Also, natural persons dealing with another natural person providing services (freelancer or self-employed) are entitled to request that payment be made through a direct payment system. Thus, the transactions processed without commission are expanded, while the limitation of tax evasion is also facilitated, since the transactions through the professional account will be recorded.
5. Improvement of the framework for the Real Estate Acquisition and Leasing Agency.
Legislative amendments are introduced with the aim of attracting the interest of investors in order to proceed with the establishment and operation of the body. In particular, it is foreseen that the institution will acquire the properties with a discount of 30% on their commercial value, a discount from which the borrower will also benefit in the future with a corresponding reduction in the repurchase price of the property.
The debtor is also given the possibility to repurchase the property before the completion of 12 years (which is the maximum time limit) as the obligation to pay the rents of 12 years is abolished in case he exercises the right of repurchase earlier.
6. Simplification and acceleration of Bankruptcy Code procedures.
It is foreseen that upon the submission of the bankruptcy petition, the debtor’s financial information is automatically sought by public bodies and banks, while any errors in the information can be corrected during the discussion of the bankruptcy petition so that it is not declared inadmissible. In addition, a clear end to the bankruptcy process is entered with the finding that the discharge of the bankruptcy has occurred by an act of the reporting judge.
7. Immediate publication of the names of companies in which the Bank of Greece detects violations of the legislation.
The Bank of Greece will no longer be obliged to wait for the outcome of any legal appeals before proceeding to publicize violations in order to facilitate the immediate notification of the public about illegal behaviors that would also affect their choices.
8. Expansion of the “Hercules” program to reduce “red loans” in banks.
The third phase of the “Hercules” program is introduced, which provides for the granting of guarantees of up to 2 billion euros to banks until 31.12.2024, in order to further reduce Non-Performing Loans.
According to protothema, through the program since 2019 the State has granted guarantees totaling 18.7 billion. euros, which decisively contributed to the reduction of the stock of NPLs in banks, from 40.6% in December 2019 to 8.6% in June 2023. The reduction of NPLs, as pointed out by the European Commission, will allow the Greek banks to focus on their contribution to the development of the Greek economy.
