By: N. Pirilides & Associates LLC
The Bill of the Purchase and Sale of Credit Facilities and Related Matters (Amending) Law of 2021 (the “Bill”) was drafted and adopted by the Parliament on 14.04.2022.
The Purchase and Sale of Credit Facilities and Related Matters Law of 2015 (Law no. 169 (I)/2015), as amended, (the “Law”) established a framework for licensing and supervision of credit facility management companies.
This framework ensures that these companies have access to the bank data of the borrowers under their management, in order to be able to assess their creditworthiness and provide them with sustainable restructuring solutions, in accordance with the provisions of the EU law of the General Data Protection Regulation (“GDPR”) on the protection of the borrowers’ personal data.
More specifically, the amendment aimed to put an end to the differentiation between the rights and obligations of borrowers, credit acquiring companies and credit servicing companies; and aimed at providing the same corresponding tools to these companies as the ones already available to credit institutions. This will effectively promote loan restructuring in accordance with the procedures of the established secondary legislation.
It is worth mentioning that the powers of the Central Bank will only be made available only to the legal persons that are set out in Article 4(1) of the Law and more specifically to the following:
- a credit institution, including an asset management company whose financial resources come from either private or public funds, in accordance with EU Law on state aid and taking into account the public debt sustainability established in the Republic and in which a license was granted by the Central Bank under the provisions of the Law,
- a licensed credit institution,
- a credit institution licensed and supervised by the competent authority of another Member State which is entitled to provide services or to have a branch established in the Republic, under the provisions of article 10A of the Law on Credit Institutions Operations,
- a financial institution, which is a subsidiary of a credit institution established in another Member State and which provides services or conducts operations in the Republic through a branch, in accordance with the provisions of Article 10B of the Law on Credit Institutions Operations,
- non-credit institution, in accordance with the provisions of the Law on Credit Contracts for Consumers in relation to Properties intended for Residence,
- any other legal entity which has received the prior written approval of the Central Bank upon submission by it, of a duly substantiated application to the Central Bank, regarding the reasons why this legal entity does not intend to submit a relevant application for a license as a credit acquisition company
In addition, according to the amended Article 5 of the Law, wider powers to the Central Bank will be granted to include provisions for the licensing, supervision, suspension or withdrawal of an administrator’s licence. Particularly, a legal entity, not referred to in Article 4(1) which intends to manage a portfolio of credit facilities in the Republic, must be specifically licensed under the said powers of the Central Bank upon having met certain preconditions, which are stated in the Law.
Finally, the amendment in the Law seeks to help credit facility administrators assess the creditworthiness of the borrowers, including the guarantors and their collateral, under their management, by giving them access to the “ARTEMIS” database of the Department of Lands and Surveys of the Republic.
In conclusion, the Law, following its aforementioned amendments, aims to create a framework and supervision of credit facility management companies. The Law, inter alia, provides for simplification of the scope of application of the basic law, so that it applies to the purchase or sale of credit facilities, as well as in cases of assignment of portfolio management of credit facilities. It also establishes a framework that ensures that all legal entities (except those already licensed by the Central Bank) that intend to take over the management of a credit facility portfolio are specifically licensed by the Central Bank.
