Prevenção do incumprimento

Before entering into a credit agreement, bank customers must:

consider whether their income is sufficient to pay the debts they intend to incur — credit instalments are a fixed monthly expenditure in the household budget and have an impact until the loan is repaid in full;
provide the credit institution with clear and correct information about their financial situation so that the institution can accurately assess their ability to repay the loan.

Over the term of the credit, bank customers must:

maintain a preventive attitude, taking into consideration possible difficulties in complying with the financial commitments they have taken on;
warn the credit institution of the possibility of not being able to pay the instalments of their credit agreements.

If a customer alerts the institution to the risk of default, the institution must provide them with a document stating their rights and obligations and indicate its contact information to receive their communications.

Credit institutions should always permanently and systematically monitor their customer’s credit agreements, performing the necessary diligence to detect any evidence of default risk at least once a month. If risk of default is detected, they must present proposals with a view to restructuring the credit.

Pre-Arrears Action Plan (PRAP)

If institutions detect evidence of risk of default or the customer notifies them that they may not be able to pay the instalments of their credit agreement, institutions must define and implement a Pre-Arrears Action Plan (PRAP).

Beginning of the PRAP and assessment of the customer’s financial capacity

When a credit institution finds evidence of deterioration in a customer’s financial capacity or a customer reports that they are at risk of default, it immediately initiates the PRAP and informs the customer thereof. If necessary, the institution requests additional information and documents from the customer to assess the risk of default and their financial capacity.

The customer must provide the information and documents requested by the institution within ten days. These elements are key for the institution to accurately assess their financial capacity and make proposals that are appropriate to the customer’s situation, aiming to preventing default on the credit agreement.

In situations where the institution detects evidence of a deterioration in the customer’s financial capacity and has the necessary and up-to-date elements to assess the risk of default, presuming it concludes that the customer has the financial capacity, the Banco de Portugal considers it good practice to include proposals to prevent arrears in the correspondence the institution sends to the customer informing them of the beginning of the PRAP.

Following this communication to the customer on beginning the PRAP, the Banco de Portugal also considers it good practice for the institution to maintain the credit agreement in the PRAP procedure, not terminating it if the customer does not cooperate, lacks financial capacity or refuses the proposal presented.

Presenting proposals under the PRAP

When the credit institution concludes that the customer has the financial capacity to prevent default, it should propose solutions appropriate to their situation, objectives and needs. Such proposals must be presented within 15 days of the risk of default having been identified or after the customer submits the elements requested.

The solutions proposed by the institution may include:

renegotiating the credit agreement, with a view to one or more of the following options:
- extending the repayment period;
- setting a period (the “grace period”) within which the customer is not called upon to pay principal or principal and interest;
- postponing the repayment (“deferral”) of part of the principal to a future instalment;
- reducing the interest rate applicable to the agreement over a certain period of time;
consolidating (i.e. joining) more than one of the customer’s credit agreements;
celebrating a new credit agreement to refinance the debt from the existing credit agreement.

In any of these cases, the institution is not allowed to increase the interest rate of credit agreements. To this end:

when renegotiating credit agreements with a variable rate, the institution is not permitted to increase the interest rate, with the reference rate established in the agreement continuing to apply;
when concluding credit refinancing agreements, the fixed or variable interest rate (reference and spread) applicable to the new agreement cannot be higher than that established in the original agreement;
when consolidating credit, the institution is not permitted to apply an interest rate higher than the average interest rate weighted by the outstanding amount of each consolidated credit agreement.

Nor is the institution authorised to charge fees for the renegotiation, refinancing or consolidation of credit agreements aiming to prevent arrears. This prohibition covers, among others, fees to analyse the renegotiation, assess collateral, change contractual conditions and conclude and formalise a new agreement.

However, the institution may charge the bank customer liabilities towards third parties, such as payments to registration offices, notaries or tax-related charges. To this effect, the institution must present the respective justifying documentation.

Monitoring the effectiveness of the solutions agreed under the PRAP

The credit institution must assess the adequacy of the solutions agreed under the PRAP on a regular basis to the financial capacity, objectives and needs of bank customers and, whenever necessary, propose other solutions.

Lodging a complaint

Considering that the credit institution does not provide the necessary support, the bank customer may submit a complaint in the complaints book — in physical form at one of the institution’s branches or in digital form — or directly at the Banco de Portugal.

Loans Arrears

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