FOR DEBTORS

FAQs about the Code of Conduct under Law 4224/2013

13 May 2021

Get answers to frequently asked questions by borrowers and guarantors about the Code of Conduct under Law 4224/2013 and debt settlement.

Role of Code of Conduct

What is the aim of the Code of Conduct?

Timely and clear information

The Code of Conduct was introduced in compliance with article 1(2) of Law 4224/2013 to ensure timely and clear information to borrowers facing difficulties regarding their inclusion in the debt settlement procedure.

Confidence, engagement and information

This Code lays down general principles of conduct and introduces best practices, aimed to foster mutual trust, commitment and information exchange between borrowers and credit servicing companies acting on behalf of the lender.

The aim of these principles and practices is for each party to be able to weigh the benefits or consequences of alternative forbearance or resolution and closure solutions for loans in arrears for which the loan agreement has not been terminated, with the ultimate goal of working out the most appropriate solution for the case in question.

Rights and obligations

In this context, credit servicing companies acting on behalf of the lender are called on to provide clear information to their borrowers about their rights and obligations, at every step of the procedure to find either a forbearance or a resolution and closure solution for their arrears.

At the same time, borrowers must be available to communicate with the credit servicing companies acting on behalf of the lender, respond in a spirit of cooperation to their invitations and generally work with them to find a debt settlement solution.

What is required by borrowers falling under the Code of Conduct?

In addition to the obligations resulting from loan contracts, the Code of Conduct requires from the borrowers at least the following:

  1. Their full and updated contact details.
  2. Their cooperation with the credit servicing company acting on behalf of the lender to find a mutually acceptable forbearance or resolution and closure solution.
  3. The timely provision of complete information on their current and future financial situation. The assessment of information will allow us to propose alternative solutions.

Failure of borrowers to comply will result in them being classified as non-cooperating and in lenders exercising their legal rights.

To what extent does the Code of Conduct ensure uniform treatment of all borrowers in arrears?

In accordance with the Code of Conduct, credit servicing companies acting on behalf of the lender shall apply an Arrears Resolution Procedure to ensure the uniform treatment of borrowers in arrears.

Especially for vulnerable social groups, credit servicing companies acting on behalf of the lender must have special policies in place for handling them, incorporating relevant criteria.

Who the Code of Conduct applies to

Who does the Code of Conduct apply to?

The Code of Conduct applies to all principal debtors, co-debtors and guarantors, including any third parties who have provided a mortgage prenotation / mortgage on their sole residence, who have entered into loan agreements for:

  • Personal loans
  • Mortgage loans
  • Credit cards
  • Loans of sole proprietorship companies and self-employed professionals
  • Loans of micro enterprises with an annual turnover of up to €1,000,000 on average during the last 3 fiscal years

I am a guarantor in a third party loan. Does the Code of Conduct apply to me?

Every provision of the Code of Conduct under Law 4224/2013 that concerns borrowers also applies to guarantors.

The initiation of the Arrears Resolution Procedure is made known at the same time to borrowers and guarantors.

What cases are excluded from the Code of Conduct?

The following are excluded from the Code of Conduct:

  1. Agreements that have been terminated prior to 01/01/2015.
  2. Claims on a borrower who has applied for inclusion in the scope of Law 3869/2010 and a trial date has been set.
  3. Claims on a borrower who is subject to judicial enforcement proceedings instituted by third-party creditors.
  4. Claims on a borrower who has already been placed under liquidation.

In cases 1 and 2, if the borrower submits, at their own initiative, the information required under the Code of Conduct, the credit servicing company acting on behalf of the lender will make use of this information and place the borrower in Step 3 of the Arrears Resolution Procedure.

In all of the above cases, the credit servicing company acting on behalf of the lender may, at its own initiative, apply the Arrears Resolution Procedure (ARP) of the Code of Conduct.

Arrears Resolution Procedure

What is the Arrears Resolution Procedure

The Arrears Resolution Procedure sets out how to deal with borrowers who have loans in arrears.

The Arrears Resolution Procedure concerns borrowers, individuals and micro enterprises with an annual turnover of up to €1,000,000 on average during the last 3 fiscal years.

The Arrears Resolution Procedure has 5 steps:

  1. Communication with the borrower
  2. Collection of financial and other information from the borrower
  3. Assessment of financial data
  4. Proposal of appropriate forbearance or resolution and closure solutions
  5. Appeals Review Process (applies to individuals, sole proprietorship companies and self-employed professionals)

After what point in time does a debt fall under the Arrears Resolution Procedure?

If a debt payment is more than 60 calendar days overdue, it falls under the Arrears Resolution Procedure (ARP) and the credit servicing company acting on behalf of the lender sends a written notification to the borrower, informing them about:

  • Their inclusion in the ARP
  • The details of their debt in arrears
  • The need to submit financial information in order to find a forbearance or resolution and closure solution

The written notification is sent within 30 calendar days from the date the debt became 60 days overdue, unless in the meantime the borrower has paid their debt in full or has reached a settlement with the credit servicing company acting on behalf of the lender.

If the borrower does not agree with the forbearance or resolution and closure solution of the company, what choice do they have?

Within 15 working days from the date the forbearance or resolution and closure solution is presented, the borrower can make a counter-proposal in writing or declare in writing that they reject all proposals.

Counter-proposal

If the borrower submits a counter-proposal, the credit servicing company acting on behalf of the lender will assess this proposal and within 2 months from its receipt will either accept it, reject it in writing, in which case the initial proposal remains active, or submit a new proposal to the borrower which is final.

Failure to respond to the proposal of the credit servicing company

In case the borrower does not respond to the proposal of the credit servicing company acting on behalf of the lender (either the initial proposal or the proposal made after the assessment of the borrower’s counter-proposal) within the specified deadline, the credit servicing company is legally obligated to consider the borrower non-cooperating and initiate all legal actions.

Note that even when a borrower is not classified (per the definitions of the Code of Conduct) as non-cooperating, the credit servicing company acting on behalf of the lender (subject to due completion of all the actions required pursuant to the Code of Conduct) may initiate all legal actions to recover the debts.

Can the borrower ask for the intervention of an independent body in the context of the Arrears Resolution Procedure?

The borrower can request advisory support from independent bodies specially set up for this purpose in compliance with Law 4224/2013 or other relevant legislation in force.

Non-cooperating borrowers

When is a borrower classified as non-cooperating?

The credit servicing company acting on behalf of the lender classifies the borrower as non-cooperating when:

  • They do not provide complete and updated contact details to the credit servicing company acting on behalf of the lender or to anyone authorised to act on its behalf (e.g. landline or mobile phone number, fax, email, home and work address) and they do not assign a relative or friend to act as procedural representative when they are not available.
  • They are not available for contact with the credit servicing company acting on behalf of the lender or anyone authorised to act on its behalf and they do not respond sincerely and clearly to calls and letters of the credit servicing company acting on behalf of the lender or of anyone authorised to act on its behalf, either in person or through their procedural representative, in any appropriate manner, within 15 working days.
  • They do not make, in person or through their procedural representative, a full and honest disclosure of information to the credit servicing company acting on behalf of the lender, or to anyone authorised to act on its behalf, regarding their current financial condition, within 15 working days from the date of any change in such condition or within 15 working days from the date when such information is requested by the credit servicing company acting on behalf of the lender or anyone authorised to act on its behalf.
  • They do not make, in person or through their procedural representative, a full and honest disclosure of information to the credit servicing company acting on behalf of the lender, or anyone authorised to act on its behalf, which is likely to have a significant impact on their future financial condition, within 15 working days from the date when such information comes to their knowledge, e.g. eligibility for a benefit, prospective ownership of new assets (inheritance, etc.), loss of ownership of assets, notice of lay-off, termination of a rental contract, redemption of insurance policies, profits of any type, etc.
  • They do not cooperate with the credit servicing company acting on behalf of the lender, or anyone authorised to act on its behalf, in finding an alternative workout arrangement for their debt in accordance with the Code of Conduct referred to in Law 4224/2013.

If the borrower is classified as non-cooperating and provided they are an individual with their sole residence at risk of being auctioned, they are notified by the credit servicing company acting on behalf of the lender, in writing or in electronic format if so agreed upon, within 15 calendar days from the date of their classification.

In case of micro enterprises, the notification about the borrower being classified as non-cooperating is provided at the time the loan agreement is terminated or earlier.

What are the legal consequences of being classified as a non-cooperating borrower?

The legal consequences of being classified as a non-cooperating borrower are the initiation by the credit servicing company acting on behalf of the lender of legal proceedings to recover its debts, e.g.:

termination, payment order issuance, injunctive measures, seizure of movable or immovable property, including the property that is a sole residence and receivables, and sale of any collateral provided by guarantors and third parties.

Furthermore, there is a risk of exclusion from favourable legal provisions (Law 3869/2010 and Law 4354/2015), as well as from possible benefits the borrower could have enjoyed had they cooperated with the credit servicing company acting on behalf of the lender to find an appropriate solution.

What is the Appeals Review Process if the borrower disagrees with the classification?

The Appeals Review Process is for borrowers who disagree with their classification as non-cooperating and wish to lodge an appeal. The process involves the following:

  • Setting up an Appeals Committee to assess the appeals.
  • Adopting standardised appeal forms.
  • Determining deadlines for lodging and assessing an appeal.

The Appeals Review Process applies to individuals, sole proprietorship companies and self-employed professionals. Each borrower may lodge an appeal only once.