Credit servicers – what are they?

When a bank (or another institution authorised to grant credit) sells a credit (“credit assignment”), the debtor enters into a relationship with a “credit servicer”.

Credit servicers are stand-alone entities acting in the name and on behalf of the entity purchasing the credit (also referred to as “credit purchaser”) and may:

collect from the debtors outstanding amounts related to the credit;
renegotiate the terms and conditions of the credit agreement with the debtors, in accordance with the credit purchaser’s instructions and provided that the renegotiation does not involve granting credit;
manage debtors’ complaints regarding the credit;
inform the debtors about any changes in interest rates and other credit-related charges or outstanding amounts.

Credit servicers are not allowed to receive payments directly from debtors. These payments must be made to the entities that have purchased the credit.

Credit servicers, having their head office in Portugal, must be authorised by the Banco de Portugal and, in their relationship with debtors, must comply with the same rules applicable to institutions authorised to grant credit. For example, they cannot charge additional credit-related charges and must provide the same information on the loan.

In particular, credit servicers must ensure compliance with applicable rules on:

the provision of information on the credit assignment;
the early repayment of credit agreements;
the right to resume the housing loan agreement, i.e. the bank customer’s right – in certain circumstances and after termination of the agreement due to default – to pay the outstanding amounts and maintain the credit agreement in force under the initial terms and conditions, with the termination considered null and void;
limits to default interest and other charges;
monitoring and management of situations of risk of arrears (PRAP) and out-of-court arrears settlement (OASP).

Credit servicers must also comply with conduct duties in their relationship with debtors, provide the complaints book and ensure timely handling of submitted complaints, and report information on the credit liabilities arising from assigned loans to the Central Credit Register of the Banco de Portugal.

What loans may banks assign?

Banks (or other institutions authorised to grant credit) may sell their loans to alternative investment undertakings and securitisation special purpose entities.

Banks and other institutions authorised to grant credit may also sell loans to other entities in the following situations:

where credit agreements have instalments more than 90 days past due; or
where they are considered as unlikely to be repaid for at least 12 months, provided that the debtor is a small, medium or large enterprise.

If your credit is sold to other entities, your credit servicer must inform you within a maximum period of 10 days.

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Credit servicers – what are they?

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