Hungary has drafted a new bill implementing Directive (EU) 2021/2167 on Credit Servicers and Credit Purchasers (NPL Directive), originally due for transposition by 29 December 2023. The proposed legislation will expedite the development of the secondary market for non-performing loans (NPLs) and ensure the effective protection of debtors’ rights.
Under the current regulatory framework, commercial debt acquisition, including the purchase of NPLs, may only be conducted by financial institutions holding the relevant licence from the National Bank of Hungary (NBH). The bill seeks to redefine this framework by introducing an exception under Hungarian banking regulations for future credit purchasers (including both natural and legal persons) who intend to acquire NPLs and are neither credit institutions nor non-credit institution lenders (i.e. financial enterprises). These credit purchasers would be permitted to acquire NPLs on a commercial basis without receivables purchasing licences, provided they either obtain a licence as a credit servicer or engage a licensed credit servicer.
Financial institutions holding a lending or receivables purchasing licence would be authorised to perform credit servicing activities without obtaining an additional licence. They would not, however, qualify as credit purchasers under the new law and would not fall within the scope of the exception introduced by the bill.
The bill designates the NBH as the supervisory authority for credit servicers and credit service providers, empowering it to issue operational licences to credit servicers, maintain a register of credit servicers, and approve the appointment of their executive officers. Additionally, the NBH will have the authority to impose measures, including exceptional actions and fines, against credit servicers, credit purchasers (or their representatives), credit institutions, and their senior executives to ensure full compliance with applicable legal requirements. The bill also excludes credit services from the intermediary services under the Hungarian banking act.
Detailed conditions and requirements for the operation of credit servicers are outlined in the bill. Credit servicers will be required to maintain an adequate system for collecting and segregating funds received from debtors, comply with anti-money laundering obligations, and ensure proper disclosure of information to debtors. Debtors must be informed of key details, including the decision and date of the NPL transfer, and the identity and contact information of the credit purchaser and credit servicer.
The bill also sets out obligations for NPL sellers and credit purchasers. Entities selling NPLs will be required to provide sufficient information to prospective purchasers to enable them to assess the value of the collateral and the likelihood of enforceability of the claims. Additionally, both NPL sellers and purchasers will have disclosure obligations towards the NBH.
The bill is currently in the legislative phase and has not yet been enacted. Therefore, we recommend closely monitoring the adoption process and any potential amendments over the coming months.
For more information about the law and its impact your NPL business in Hungary, contact your CMS client partner or these CMS experts.
The article was co-authored by Márton Lázár.
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