Finland is finally moving on with the implementation of the Credit Servicers and Credit Purchasers Directive (2021/2167/EU), colloquially dubbed the NPL Directive, with the draft government bill published on 13 September. The final government bill is expected later this autumn, with the new Act on Credit Servicers and Credit Purchasers entering into force as soon as possible. Finland is already late to the game, as the European Union imposed deadline for implementation has long since passed, and as we understand, certain other jurisdictions like Sweden and Germany, have already approved their first licensed credit servicers.
The new Act would set out the guidelines for purchasers of non-performing loans originated by credit institutions and to those who handle the management of such loans on behalf of the purchasers. In the future, it would be the duty of the credit purchaser to notify the underlying debtor of the transfer of a non-performing loan. In addition, a credit servicer must in certain circumstances be appointed to manage the loan granted to a consumer. This will not come as a shock since both practices are already prevalent in the market. However, what is new is that credit servicing in this sense would require a license by the Financial Supervisory Authority, and such license would be passportable across the European Union.
More broadly, neither the Act itself nor the delay in implementation will, in our view, hold material practical relevance in the Finnish market. This is due to the makeup of the domestic credit and credit servicing market, where on the one hand, the majority of purchased and serviced consumer credit is originated by non-bank lenders, and on the other hand, the primary and secondary mortgage market is tightly in the hands of credit institutions, both scenarios ostensibly falling outside the scope of the new Act.
However, the government bill will have certain surprising ripple effects to the activities of entities that are not the primary subject of the new legislation, such as payment institutions, debt collectors and invoicing services providers, potentially including the purchasers, collection agents and servicers of loan portfolios and traditional securitisation transactions. The preparatory works lay down interpretation on the split of existing supervisory responsibilities of different administrative authorities and consequently market operators with certain types of business models will find themselves in need of additional regulatory approvals. The Act will also impose certain additional reporting and disclosure requirements. If you are concerned that this may impact your business, we are happy to discuss.