The guidelines amending the Joint Committee Guidelines on complaints-handling aim to establish consistent and effective supervisory practices across the European Union. They apply to credit servicers under Directive 2021/2167 on non-performing loans, ensuring the protection of borrowers' rights. The goal is to promote the development of secondary markets for non-performing loans while ensuring transparent handling…
The document is a guide published by the European Banking Authority (EBA) in July 2024, entitled "Guidelines amending Joint Committee Guidelines on complaints-handling." It amends the Joint Committee Guidelines (JC Guidelines) on complaint management in the securities (ESMA) and banking (EBA) sectors to include credit servicers in accordance with Directive (EU) 2021/2167, known as the Credit Servicers Directive (CSD). The scope covers the management of borrower complaints in the context of non-performing loans (NPL) and applies to competent authorities and financial institutions within the European Union. The national transposition period of the directive ends on 29 December 2023, with application of the guidelines planned for 2025, linked to the entry into force of the future Payment Services Regulation (PSR) (p. 1-9).
The subject concerns the amendment of the Joint Committee Guidelines (JC Guidelines) to extend their application to credit servicers, key actors in the management of non-performing loans (NPL) in Europe, in accordance with Directive (EU) 2021/2167. This extension aims to ensure effective and transparent procedures for handling borrower complaints, strengthening consumer protection and harmonizing practices within the EU (p. 4-5).
This subject is important because the development of secondary NPL markets depends on the reputation of the entities involved, notably credit servicers. The Directive requires Member States to ensure that these entities have adequate procedures to handle borrower complaints (Article 24(1)).
The main findings are:
- The JC Guidelines, in force since 2014 in the banking, insurance, and securities sectors, have proven effective and remain appropriate (p. 7-8).
- Extending to credit servicers avoids divergent transpositions among Member States and ensures uniform consumer protection (p. 7-8).
- The public consultation (November 2023–February 2024) received 11 responses, mostly favorable to the extension, although some concerns were expressed about the definition of complaints and the scope (p. 4, 18-24).
- The EBA decided not to modify the definition of complaints nor to broaden the scope beyond credit servicers covered by the directive, to respect the legal framework (p. 8, 21-24).
The conclusions are that amending the JC Guidelines to include credit servicers is the best option, ensuring harmonization and enhanced borrower protection with costs considered not significant relative to the benefits (p. 15-17).
The recommendations are:
- Apply the amended JC Guidelines to credit servicers three months after the entry into force of the PSR, expected in 2025 (p. 5, 9, 26).
- Competent authorities must notify their compliance within two months following the publication of the official translations (p. 11).
- Maintain the current definition of complaints and the scope limited to credit servicers under the CSD (p. 21-24).
- Publish the final guidelines in 2024 to allow stakeholders to prepare in advance (p. 19, 26).
Directive (EU) 2021/2167 aims to develop secondary markets for non-performing loans (NPL) in Europe by facilitating the transfer of these loans and protecting borrower rights. It requires credit servicers to establish effective and transparent procedures to handle borrower complaints (Article 24(1)) (p. 6).
The existing JC Guidelines, developed by European supervisory authorities (ESMA, EBA, EIOPA) since 2014, govern complaint management in the banking, insurance, and securities sectors but did not cover credit servicers (p. 7).
The objective of the document is to extend these guidelines to credit servicers to ensure consistent and effective application of the Directive’s requirements, avoid national divergences, and strengthen consumer protection across the European Union (p. 6-8).
The limitations relate to the scope strictly defined by the Directive, which covers only credit servicers linked to NPLs, excluding other types of non-NPL servicers. Moreover, the application of the guidelines is conditional on the amendment of the EBA regulation via the future PSR expected in 2025 (p. 8-9).
Extension of the JC Guidelines to credit servicers:
- The CSD Directive requires credit servicers to have effective complaint management procedures (Article 24(1)) (p. 6).
- The JC Guidelines, in force since 2014, have proven effective in the banking, insurance, and securities sectors (p. 7-8).
- The extension aims to harmonize practices, avoid national divergences, and strengthen borrower protection (p. 7-8).
- The public consultation confirmed broad support for this extension, despite some criticisms regarding the definition of complaints and the scope (p. 18-24).
Definition of complaints and scope:
- The definition of complaints in the JC Guidelines covers expressions of dissatisfaction related to credit servicers’ activities (p. 32-33).
- Some respondents requested a narrower definition to account for credit servicers’ specificities, notably the distinction between general dissatisfaction linked to non-payment situations and complaints based on actual breaches (p. 21-23).
- The EBA considered that the current definition already excludes complaints outside the scope of credit servicing activities and does not require modification (p. 22-23).
- The scope is limited to credit servicers covered by the CSD Directive, excluding non-NPL servicers, in accordance with the legal framework (p. 21).
Costs and benefits:
- Two options were considered: create specific guidelines or extend the existing JC Guidelines (p. 16-17).
- The chosen option is to extend the JC Guidelines, ensuring coherence, efficiency, and harmonization (p. 17).
- Costs for credit servicers and competent authorities are considered not significant, as largely absorbed by compliance with the Directive (p. 15-17).
Implementation and timeline:
- Application of the guidelines is conditional on the entry into force of the PSR and the amendment of the EBA regulation, planned for 2025 (p. 9, 26).
- Competent authorities must notify their compliance within two months following the publication of the official translations (p. 11).
- Early publication of the final guidelines in 2024 aims to facilitate stakeholder preparation (p. 19, 26).
Non-substantial amendments:
- Update of regulatory references and removal of obsolete provisions related to PSD2 and MCD (p. 7-8, 25).
- Correction of a numbering error in the guidelines (p. 26).
Summary of amended guidelines:
- They cover complaint management policy, the dedicated function, recording, reporting, internal monitoring, information provision to complainants, and response procedures (p. 30-35).
- Definitions of firms and complaints are extended to include credit servicers (p. 31-33).
Established facts:
- Directive (EU) 2021/2167 requires credit servicers to establish effective complaint management procedures (p. 6).
- The existing JC Guidelines are effective and widely accepted in the banking, insurance, and securities sectors (p. 7-8).
- The public consultation received 11 responses, mostly favorable to extending the JC Guidelines to credit servicers (p. 18-19).
Assumptions:
- Applying the JC Guidelines to credit servicers will produce harmonization of practices and better consumer protection (p. 7, 15-17).
- The costs induced by these guidelines are absorbed by compliance costs with the Directive (p. 15-17).
Author’s interpretations:
- Extending the JC Guidelines is the best option to ensure coherence and efficiency (p. 16-17).
- The current definition of complaints is sufficient to cover credit servicers’ specificities without generating excessive administrative burden (p. 21-23).
- Limiting the scope to credit servicers covered by the Directive complies with the legal framework and avoids national divergences (p. 21).
Uncertainties:
- The precise application date depends on the entry into force of the PSR and the amendment of the EBA regulation, expected in 2025 (p. 9, 26).
- The real impact on the administrative burden of credit servicers remains to be observed, notably due to the potentially high volume of complaints in this sector (p. 21-23).
The EBA concludes that amending the Joint Committee Guidelines to extend their application to credit servicers in accordance with Directive (EU) 2021/2167 is necessary and beneficial. This extension ensures a harmonized and effective approach to managing borrower complaints within the European Union, strengthening consumer protection and confidence in secondary markets for non-performing loans (p. 15-17).
The main recommendations are:
- Apply the amended guidelines to credit servicers starting three months after the entry into force of the Payment Services Regulation (PSR), expected in 2025 (p. 5, 9, 26).
- Competent authorities must notify their compliance within two months following the publication of the official translations (p. 11).
- Maintain the current definition of complaints and the scope limited to credit servicers covered by the Directive, without extension to non-NPL servicers (p. 21-24).
- Publish the final guidelines in 2024 to enable stakeholders to prepare effectively (p. 19, 26).
- Incorporate non-substantial amendments to update regulatory references and correct minor errors (p. 7-8, 26).
These measures aim to ensure consistent and effective implementation of regulatory requirements while limiting costs and administrative burdens for the actors concerned.
Synthesis note written from the full document by DataSAI Academy. This note comes from the scientific library of the DataSAI Academy, open to all.