By a majority vote, Parliament has enacted a legislative package to align national law with European Directive 2021/2167, which establishes a unified framework for credit servicers and purchasers. The legislation aims to facilitate the creation of a secondary market for Non-Performing Loans (NPLs), regulate the licensing and supervision of credit servicers, and protect borrowers' rights in loan sale transactions. Specifically, with 27 votes in favour, 17 against, and one abstention, the plenary approved seven bills to establish a legislative framework for the secondary loan market.

Two amendments were also approved: the first prohibits the sale of performing loans, while the second grants authority to the Central Bank of Cyprus (CBC) to refuse or revoke licenses for credit servicers and to veto board appointments in credit servicing companies when deemed necessary for the protection of national interests.

The framework provides credit servicers access to property data from the Land Registry and mandates compliance with anti-money laundering and data protection laws, as recommended by the Data Protection Commissioner. It also includes borrower notification obligations before performing loan sales and the right for borrowers to repurchase their loans. The legal framework aligns credit transactions with the new standardized management regime, eliminating licensing requirements and the €100,000 minimum capital threshold for credit purchasing companies.

This framework will apply to credit facilities transferred or sold by credit institutions after the implementation of the proposed legislation, as well as to all future restructurings, substitutions, modifications, and resales of such loans by a credit purchaser.

Credit facilities that have already been transferred and are currently held by credit institutions prior to the new framework taking effect will remain governed by the provisions of the Sale of Credit Facilities and Related Matters Act 2015, which will continue to apply to any future restructurings or resales of these facilities, whether serviced or unserviced.

Author: Michaela Antoniou and Skevi Georgiou