This final report aims to amend the guidelines on arrears and foreclosures in response to changes introduced by the Credit Servicers Directive. It emphasizes the importance of consistent implementation of the Mortgage Credit Directive provisions, particularly regarding creditor forbearance before foreclosure proceedings. The proposed amendments do not alter the overall requirements but seek to align the guidelines…
This document is the final report published by the European Banking Authority (EBA) on 28 June 2024, referenced EBA/GL/2024/10. It concerns the amendment of EBA/GL/2015/12 guidelines related to arrears and residential mortgage repossession procedures. The scope covers consumer credits linked to residential real estate in the European Union, in connection with Directive 2014/17/EU (Mortgage Credit Directive, MCD) and Directive 2021/2167 on credit servicers (Credit Servicers Directive, CSD). The document comprises 11 pages and is addressed to competent authorities and financial institutions involved in arrears and repossession management within mortgage credit frameworks.
The EBA final report presents amendments to the guidelines on arrears and residential mortgage repossession (EBA/GL/2015/12) to ensure their consistency with recent European legislative developments, notably the Credit Servicers Directive (CSD) which entered into force on 29 December 2023. Directive 2014/17/EU (MCD) had established rules encouraging reasonable forbearance before any repossession procedure, with EBA guidelines published in 2015 to facilitate uniform application. The CSD incorporated in its Article 28(2) a text almost identical to Guideline 4 of the EBA guidelines, concerning the resolution process between creditor and borrower. To avoid any contradiction or redundancy with level 1 legislation, the EBA decided to delete this Guideline 4 from the amended guidelines. Furthermore, Guideline 5 was adjusted to now refer to the amended Article 28(1) of the MCD, and a new Guideline 6 was added to align outsourcing requirements with recent EBA guidelines on this subject. These amendments are essentially technical and administrative, with no substantive change to requirements. The EBA deemed it disproportionate to launch a public consultation or cost-benefit analysis, relying on the favorable opinion of its Banking Stakeholder Group. The amended guidelines will be published in all official EU languages, with a two-month period for competent authorities to comply after publication.
Directive 2014/17/EU (MCD) aims to harmonize rules on consumer mortgage credit in the EU, promoting transparency, consumer protection, and sustainable credit management. Article 28 of this directive requires Member States to encourage forbearance before any repossession procedure. To ensure consistent application, the EBA published detailed guidelines on arrears and repossession in 2015. In 2021, the Credit Servicers Directive (CSD) was adopted, regulating non-performing loans and amending Article 28 of the MCD by integrating requirements derived from EBA guidelines. This development created a legal overlap, necessitating a revision of the guidelines to avoid any contradiction with level 1 legislation. The main objective of the document is therefore to amend the EBA guidelines to align them with the new legislation, by removing redundant provisions and updating regulatory references, while maintaining continuity of requirements for authorities and financial institutions.
1. Legislative and regulatory framework:
- Directive 2014/17/EU (MCD) imposes measures for arrears management and forbearance before repossession (p. 3, 5).
- Directive 2021/2167 (CSD) regulates non-performing loans and amends Article 28 of the MCD by integrating Guideline 4 of the EBA guidelines (p. 3, 5).
2. Amendments to the EBA guidelines:
- Deletion of Guideline 4 relating to the resolution process between creditor and borrower, now integrated into level 1 legislation (p. 5, 10).
- Amendment of Guideline 5 to refer to the amended Article 28(1) MCD, concerning documentation and retention of forbearance records (p. 10).
- Addition of a new Guideline 6 on outsourcing requirements, aligned with recent EBA outsourcing guidelines (EBA/GL/2019/02), replacing the former reference to repealed CEBS Guidelines (p. 5, 10).
3. Removal of obsolete provisions:
- Removal of the special regime for national competent authorities under the MCD but not under the EBA regulation, rendered unnecessary by a 2020 regulatory amendment (p. 5).
4. Adoption process and consultation:
- The EBA deemed it disproportionate to launch a public consultation or cost-benefit analysis, given the non-substantial nature of the amendments (p. 4, 6).
- The opinion of the Banking Stakeholder Group was sought and raised no objections (p. 4, 6).
5. Implementation and compliance:
- The amended guidelines will be published in all official EU languages.
- Competent authorities will have two months after publication to notify compliance and implement the amendments (p. 4, 9).
Established facts:
- Directive 2021/2167 (CSD) incorporated in its Article 28(2) a text almost identical to Guideline 4 of the EBA guidelines on arrears and repossession (p. 3, 5).
- This incorporation creates redundancy between level 1 legislation and the EBA guidelines, which contradicts the principle that guidelines should not repeat or contradict legislation (p. 3, 5).
Assumptions and interpretations:
- The EBA interprets that deletion of Guideline 4 from the guidelines is necessary to comply with the European legal framework and avoid confusion (p. 5).
- Other amendments are considered non-substantial, mainly administrative or updating regulatory references (p. 5, 6).
Uncertainties:
- The document does not mention specific uncertainties regarding the operational impact of the amendments on financial institutions or competent authorities.
- The absence of a public consultation could limit consideration of certain practical impacts, although the Banking Stakeholder Group expressed no concerns (p. 4, 6).
The EBA concludes that the guidelines on arrears and repossession must be amended to delete Guideline 4 now integrated into level 1 legislation, to ensure regulatory consistency and avoid contradictions. Other amendments are technical and administrative adjustments aimed at updating references and removing obsolete provisions. The EBA recommends competent authorities comply with the amended guidelines within two months after their publication in all official EU languages. No public consultation nor cost-benefit analysis was deemed necessary due to the proportionate and non-substantial nature of the amendments. The document foresees publication of the amended guidelines on the EBA website and mandatory notification by competent authorities regarding their compliance.
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