The Bank of Portugal has clarified its role under the new legal framework for the cession of credits, where banks sell credit portfolios, typically non-performing loans, to other entities. With the new regime taking effect on December 10, the central bank will oversee the activities of companies purchasing these credits and the entities managing them, including handling borrower complaints.
Currently, until the regime is fully implemented, the Bank of Portugal is not responsible for processing complaints from bank customers against companies buying large credit portfolios from banks, nor against subcontracted entities managing the credits. In such disputes, the court remains the sole recourse.
A report published in early September highlighted how the sale of mortgage credits by banks has left vulnerable clients struggling with payments defenseless. Additionally, a case was reported where a client successfully litigated against BPI, which had sold her credit to a Luxembourg-based company. Despite winning, she continues to fight to retain her home, amidst similar rulings by the Supreme Court of Justice that annulled the sale of mortgage loans, citing “fraud to the law.”
Under the new framework, the Bank of Portugal will have the authority to conduct inspections and assess debtor complaints. If regulatory breaches occur, it can issue directives, recommendations, and even impose sanctions in administrative offense proceedings.
The central bank will also have the power to revoke credit managers’ operational authorization in specific cases. Furthermore, it will receive regular data on credit contracts sold by banks, including the banks involved, outstanding balances, the number of sales during each period, and the types of credits sold, whether mortgage or consumer loans. These credits will need to be reported to the central credit responsibilities.
To date, the Bank of Portugal has not disclosed details of credit sales made by banks.
Further inquiries regarding whether a client with a sold credit requesting a new loan from another bank results in the new lender being aware of the previous credit, the Bank of Portugal explained that the sale to an entity outside its supervision removes that credit from the client’s credit responsibility map. Hence, the new bank is unaware of it and does not consider it in the client’s creditworthiness assessment, unless the client discloses this information.
With the new regime, sold credits will be included in the credit responsibility center accessible by banks.
