The amendment to the Act on Loan Servicers and Loan Purchasers, which took effect on June 1, 2024, introduces fundamental changes in the management and purchase of non-performing loans provided by credit institutions. These changes will have a significant impact on loan servicers and purchasers, i.e., collection agencies, particularly with regard to obtaining the license required to carry out this activity.
On June 1, 2024, the new Act No. 106/2024 Coll. on Loan Servicers and
Loan Purchasers and on Amendments to Certain Acts entered into force. This Act introduces fundamental changes in the area of the management and purchase of non-performing loans provided by credit institutions, which will have a significant impact on loan servicers and purchasers—so-called collection agencies—particularly with regard to obtaining the license required to perform this activity.
The management and purchase of non-performing loans represent a specific area of the financial market that involves the management and collection of loans that are not being repaid in accordance with the agreed terms. Non-performing loans may pose a risk to financial institutions, but at the same time they offer investment opportunities for companies specializing in their management and recovery.
Purpose of the New Law
The main objective of the new law is to effectively address the issue of non-performing loans and to support the development of secondary markets for non-performing loans within the European Union (EU). The Act reflects Directive (EU) 2021/2167 of the European Parliament and of the Council, which establishes common rules for the management and purchase of non-performing loans.
Who is affected by the new Act?
The new Act No. 106/2024 Coll. on Loan Servicers and Loan Purchasers affects several
entities involved in the management and purchase of non-performing loans. Specifically, these include:
1.) Loan Servicers
- Legal entities that, as part of their business activities, manage and enforce the rights and obligations related to the creditor’s rights in connection with a defaulted loan agreement or the defaulted loan agreement itself on behalf of the loan purchaser and perform loan servicing.
- Managers must obtain a license from the National Bank of Slovakia (NBS) to perform this activity.
2.) Loan purchasers
- Entities other than credit institutions that, as part of their commercial, business, or professional activities, acquire for consideration the transferred rights of a creditor in connection with a defaulted loan agreement or the defaulted loan agreement itself.
3.) Credit service providers
- Individuals or companies that, under a contract with a loan servicer, perform certain activities related to loan servicing. These entities may perform only some of these activities, but not all.
4.) Credit institutions
- B Banks and other financial institutionsB that provide loans and may decide to sell non-performing loans to loan servicers or loan purchasers.
5.) Debtors
- B Natural and legal personsB who have non-performing loans and whose claims will be managed or sold under the new law.
6.) Regulatory Authorities
- National Bank of Slovakia (NBS), which is responsible for granting licenses, supervising the management and purchase of loans, and ensuring compliance with the new law.
7.) Cross-border loan servicers and purchasers
- Foreign entities that wish to engage in the servicing or purchase of non-performing loans in Slovakia under the freedom to provide services or through a branch.
Obligations of collection agencies under the new law
Collection agencies must now obtain a license from the National Bank of Slovakia. The new law sets out specific conditions for granting this license, including obligations toward debtors, management duties, and rules for cross-border activities. A person who is already engaged in loan management in the Slovak Republic as of June 1, 2024, may continue to perform this activity without a license until November 30, 2024. If such a person manages non-performing loans after that date without a license, the National Bank of Slovakia may impose a fine of up to 200,000 euros.
How to obtain a license for a collection agency?
To obtain a license, the following conditions must be met:
- Submission of an application - The applicant must submit a complete license application to the National Bank of Slovakia.
- Documentation - Submission of all necessary documents, including proof of professional knowledge and experience in the field of loan management.
- Compliance with the law - The applicant must demonstrate that its activities will comply with the new law and relevant regulations.
Additional legal provisions:
The new law also defines:
- Legal relationships between credit managers and credit purchasers
- Conditions for revocation of a license
- Protection of debtors’ rights
- Supervision and sanctions
Legal assistance in obtaining a license
To obtain a license for a credit servicer, we recommend utilizing the services of our law firm, Hronček & Partners. Our law firm has extensive experience representing clients in licensing proceedings before the National Bank of Slovakia. We will provide you with the necessary legal advice and effectively assist you in preparing all required documents and forms for submitting an application for a credit administrator license, as well as representing you before the National Bank of Slovakia during the licensing proceedings themselves. We handle communication with the relevant regulatory authorities and address all legal issues that may arise during this process.
If you are interested in our services or need further information, please do not hesitate to contact us via the contact form or at the email address: info@legalfirm.sk
