Licence for Non-Performing Loan Managers

New Act on the Non-Performing Loans Market and the relevant implementing decree of the Czech National Bank

At the beginning of this year, the Chamber of Deputies approved the new Act on the Non-Performing Loans Market (the Act), which transposes Directive (EU) 2021/2167 of the European Parliament and of the Council on credit managers and credit dealers. The Czech National Bank has already published a draft implementing decree to this Act.

Definitions by law

Non-performing loans include a deferred payment, cash loan, credit or similar financial service provided by a credit institution if the customer is more than 90 days past due or the credit institutionotherwise has an indication that the customer is unlikely to repay its credit obligations in full.

The legislator distinguishes between a non-performing loan servicer, which is a commercial corporation established in the Czech Republic that takes care of non-performing loans or enforces their payment, and a non-performing loan trader, which is a person to whom non-performing loans are transferred in the course of its business.

Non-performing loan management includes:

1. collection or recovery of a debt due on a non-performing loan,
2. negotiations on the modification of the content of an obligation under a non-performing credit agreement, unless the mediation of consumer credit requires authorisation under the law governing consumer credit,
3. dealing with complaints and claims from the borrower relating to the non-performing loan, or
4. informing the borrower of a change in the interest rate or fee related to the non- performing loan or the maturity of the debt on the non-performing loan.

Authorisation to act as a non-performing loan manager

Only selected entities will be authorised to manage non-performing loans in the course of their business activities. In addition to banks, savings and credit cooperatives, this will include non-bank consumer credit providers and non-performing loan administrators under a non-performing loan administrator licence from the Czech National Bank.

An applicant for a non-performing loan servicer licence must submit extensive information and apply a system of governance, i.e. have in place sound administrative and accounting procedures, an internal control system, AML rules or rules for dealing with borrowers. The licensing procedure in this respect is similar to that of a non-bank consumer credit provider .

The Act sets deadlines for the Czech National Bank to decide whether to grant a permit - it must invite the applicant to remove any defects within 45 days of receiving the application, and then has 90 days from the date of the commencement of proceedings to decide whether to grant the permit.

Transitional provisions for current administrators

Those servicers who had a trade licence to administer non-performing loans before the Act came into force may continue to operate under that licence until 29 June 2024 at the latest. If they apply for a licence to operate as a non-performing loan servicer within that period, they may continue to operate after that period under their existing licence until the decision on that application becomes final.

What can we do for you?

• We will prepare a complete application for a non-performing loan servicer license including all required attachments.
• We will prepare a business plan, including a forecast of economic performance in the form of financial statements and business development strategy.
• We will create complete internal regulations and procedures, including risk management.
• We will develop anti-money laundering (AML/CFT) measures.

After obtaining the permit:

• We will ensure the performance of compliance and AML.
• We will arrange reporting to the CNB.
• In cooperation with an accountant and a tax office, we provide bookkeeping.

If you are interested in our non-performing loan servicer licensing services or other financial services, please contact us at info@stuchlikova.com or call +420 222 767 393 to arrange an initial consultation.