Response to consultation on draft Guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of credit servicers
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When regulating Credit Servicers at the EU level, we believe that it is important to mention that Credit Servicers are pure service companies that do not take on bank deposits, nor grant credits, and that they are not systematically significant. We believe that these facts could be better reflected in the draft EBA Guidelines and should also be clearly communicated to competent national authorities when setting up the national supervisory procedures (section 8).
Overall, we welcome the principle of proportionality but, in our experience, there is large room for interpretation on how to apply this principle. Intrum has worked in the credit servicing industry for 100 years and we are active in 24 European countries. The European regulatory landscape is very scattered and the manner in which debt collection (credit servicing) companies are organized and structured differs tremendously from country to country. Consequently, we strongly welcome further harmonization. For the same reason, we consider that it would be useful for all stakeholders to clarify the applicability of the areas stated in section 1 item 13, through adding common EU thresholds. This would create predictability, not only for the Credit Servicers but also for the competent authorities.
Furthermore, the EBA Guidelines appear to target only the largest credit servicing companies. However, most credit servicing companies are rather small. Moreover, the criteria stated in section 1 item 13 are very similar to the ones used for the banking industry, e.g. item 13. (e)., whereas the current national debt collection licenses are typically valid for servicing any kind of debt or credit. In addition, our industry is segmented between companies offering pure credit servicing activities, and companies investing in the purchase of credit portfolios (typically the larger companies). Several of these companies are engaged in both credit servicing and credit purchasing. The NPL Directive only includes limited legal obligations for credit purchasers and explicitly states that credit purchasers shall not be subject to additional requirements (NPL Directive art 17.2, recitals 40). Inevitably, when applying the proposed criteria, credit purchasers in companies offering both credit servicing and credit purchasing activities will become subject to further requirements unless the credit purchasing segment is expressly carved out from the assessment criteria (e.g. excluded from the balance sheet total).
Section 2 item 14: Credit Servicers should ensure that their management or administrative organ, in its entirety, possesses adequate knowledge and experience to perform their duties at all times. In our view, this is an overly strict requirement. To recruit suitable management and board members will likely take at least 6 months, hence reasonable time should be given to comply with this requirement.
Section 2 item 16: The administrative or management organ in its supervisory function should be responsible for performing the final assessment.
It should be clarified that delegation of the assessment is possible, while the final responsibility lies with the administrative or management organ. This would follow normal practice when such tasks have been delegated to a nomination committee and/or a professional recruitment firm.
Section 3 items 25 and 26: They imply that there should be regular training for members in management and administrative organs (up-to-date understanding of risks, governance arrangements and conflicts of interest). If this assumption is correct, we recommend clarifying that the requirements relate to training of members, which in our view, would be especially important when onboarding new members.
Section 3 item 31: The proposed requirements are exhaustive and appear adapted for credit institutions, hence not entirely rational for this sector. Consequently, we recommend leaving room for adaptation, both to the specific jurisdiction and to the entity in question. For example, some areas would simply not legally affect the business, e.g., anti-money laundering laws which are commonly not applicable to Credit Servicers. Furthermore, we suggest that specific competence areas which are not typically part of the Credit Servicers’ business could be handled on an ad hoc basis by external consultants and/or by providing ad hoc training for members of Management and Administrative organ.
Section 4 item 36 a: We propose to remove the requirement for fraud detection and prevention in the context of credit management, simply because it is a very specific requirement which is applicable to granting credits rather than servicing credits.
The requirements are exhaustive and will require the storage of important amounts of personal data. In order to comply with the EU General Data Protection Regulation and to promote a harmonized approach, it would be helpful to set common criteria on how long the documentation is expected to be retained by the Credit Servicer.
Section 8 item 48: The NPL Directive opens up for passporting abilities and communication between home and host authorities. For this reason, it would be more efficient if the supervisory procedures could be further defined by EBA, e.g. by establishing a common EU-template for this purpose. This would not only strengthen harmonization and efficiency, but also ensure that the EBA procedures are fully transparent and predictable, so that both competent authorities and Credit Servicers clearly understand the expectations.
To conclude, Intrum would like to see high and harmonized standards applied across the board. If the EBA’s proposal can be strengthened as suggested above we believe that the end-result can be an efficient market, beneficial to all stakeholders.
Q1: Is the section on subject matter, scope, definitions and implementation appropriate and sufficiently clear?
Yes.When regulating Credit Servicers at the EU level, we believe that it is important to mention that Credit Servicers are pure service companies that do not take on bank deposits, nor grant credits, and that they are not systematically significant. We believe that these facts could be better reflected in the draft EBA Guidelines and should also be clearly communicated to competent national authorities when setting up the national supervisory procedures (section 8).
Q2: Is the section on proportionality appropriate and sufficiently clear?
No.Overall, we welcome the principle of proportionality but, in our experience, there is large room for interpretation on how to apply this principle. Intrum has worked in the credit servicing industry for 100 years and we are active in 24 European countries. The European regulatory landscape is very scattered and the manner in which debt collection (credit servicing) companies are organized and structured differs tremendously from country to country. Consequently, we strongly welcome further harmonization. For the same reason, we consider that it would be useful for all stakeholders to clarify the applicability of the areas stated in section 1 item 13, through adding common EU thresholds. This would create predictability, not only for the Credit Servicers but also for the competent authorities.
Furthermore, the EBA Guidelines appear to target only the largest credit servicing companies. However, most credit servicing companies are rather small. Moreover, the criteria stated in section 1 item 13 are very similar to the ones used for the banking industry, e.g. item 13. (e)., whereas the current national debt collection licenses are typically valid for servicing any kind of debt or credit. In addition, our industry is segmented between companies offering pure credit servicing activities, and companies investing in the purchase of credit portfolios (typically the larger companies). Several of these companies are engaged in both credit servicing and credit purchasing. The NPL Directive only includes limited legal obligations for credit purchasers and explicitly states that credit purchasers shall not be subject to additional requirements (NPL Directive art 17.2, recitals 40). Inevitably, when applying the proposed criteria, credit purchasers in companies offering both credit servicing and credit purchasing activities will become subject to further requirements unless the credit purchasing segment is expressly carved out from the assessment criteria (e.g. excluded from the balance sheet total).
Q3: Is the section 2 on the suitability assessment by credit servicers appropriate and sufficiently clear?
Yes, but we would welcome further adjustments and clarifications.Section 2 item 14: Credit Servicers should ensure that their management or administrative organ, in its entirety, possesses adequate knowledge and experience to perform their duties at all times. In our view, this is an overly strict requirement. To recruit suitable management and board members will likely take at least 6 months, hence reasonable time should be given to comply with this requirement.
Section 2 item 16: The administrative or management organ in its supervisory function should be responsible for performing the final assessment.
It should be clarified that delegation of the assessment is possible, while the final responsibility lies with the administrative or management organ. This would follow normal practice when such tasks have been delegated to a nomination committee and/or a professional recruitment firm.
Q4: Are the sections 3 and 4 on the individual and collective criteria for the assessment of members of the management or administrative organ appropriate and sufficiently clear?
Yes, but we recommend some clarifications.Section 3 items 25 and 26: They imply that there should be regular training for members in management and administrative organs (up-to-date understanding of risks, governance arrangements and conflicts of interest). If this assumption is correct, we recommend clarifying that the requirements relate to training of members, which in our view, would be especially important when onboarding new members.
Section 3 item 31: The proposed requirements are exhaustive and appear adapted for credit institutions, hence not entirely rational for this sector. Consequently, we recommend leaving room for adaptation, both to the specific jurisdiction and to the entity in question. For example, some areas would simply not legally affect the business, e.g., anti-money laundering laws which are commonly not applicable to Credit Servicers. Furthermore, we suggest that specific competence areas which are not typically part of the Credit Servicers’ business could be handled on an ad hoc basis by external consultants and/or by providing ad hoc training for members of Management and Administrative organ.
Section 4 item 36 a: We propose to remove the requirement for fraud detection and prevention in the context of credit management, simply because it is a very specific requirement which is applicable to granting credits rather than servicing credits.
Q5: Are the sections 5 and 6 on the individual and collective assessment of members of the management or administrative organ appropriate and sufficiently clear?
Yes.The requirements are exhaustive and will require the storage of important amounts of personal data. In order to comply with the EU General Data Protection Regulation and to promote a harmonized approach, it would be helpful to set common criteria on how long the documentation is expected to be retained by the Credit Servicer.
Q6: Is section 7 on corrective measures appropriate and sufficiently clear?
YesQ7: Is section 8 on the assessment by competent authorities appropriate and sufficiently clear?
Yes, but to support harmonization and promote transparency, we recommend one further step.Section 8 item 48: The NPL Directive opens up for passporting abilities and communication between home and host authorities. For this reason, it would be more efficient if the supervisory procedures could be further defined by EBA, e.g. by establishing a common EU-template for this purpose. This would not only strengthen harmonization and efficiency, but also ensure that the EBA procedures are fully transparent and predictable, so that both competent authorities and Credit Servicers clearly understand the expectations.
To conclude, Intrum would like to see high and harmonized standards applied across the board. If the EBA’s proposal can be strengthened as suggested above we believe that the end-result can be an efficient market, beneficial to all stakeholders.