New Legal Regime for Bank Credits Enacted to Protect Consumers
The Portuguese government has officially promulgated a new legal framework governing the sale and management of bank credits, a move prompted by years of consumer complaints regarding the opaque and often aggressive practices of third-party debt collection agencies. The new legislation, which transposes a European directive from 2021, aims to establish clear rules and provide greater protection for debtors, particularly those with housing loans.
The announcement follows extensive reporting by consumer defense association Deco, which has documented what it calls “violations” of consumer rights since 2017. According to Deco, a significant number of families have found their mortgages sold by their original banking institution to external, often unregulated, firms without clear communication or guidance. This left borrowers in a precarious position, unsure of who held their debt and what their negotiation rights were.
Natália Nunes, coordinator of Deco's financial protection office, stated in a recent interview that the lack of specific legislation created a “painful process” for consumers. When a bank sells a portfolio of non-performing loans, the new owner is often a non-financial entity outside the supervisory scope of the Bank of Portugal. As a result, borrowers lost key legal protections previously available to them, including the statutory right to cure a default by paying the arrears and resuming the original installment plan. This has led to severe consequences for some, including the loss of their family homes.
The new Legal Regime for the Assignment and Management of Bank Credits directly addresses this issue by introducing the “principle of neutrality.” This principle mandates that the sale of a loan cannot diminish the borrower's contractual rights. All terms, conditions, and legal protections that existed with the original lender must be maintained by the new credit owner. This explicitly includes the right of contract resumption, a critical safeguard for those facing temporary financial hardship.
The legislation will require companies that purchase and manage credit portfolios to operate under a more structured and supervised environment. While the Bank of Portugal had previously issued notices to limit aggressive contact from recovery agencies, Deco’s jurists argued that a formal regulatory framework was necessary to prevent abuses. The new law is expected to bring this much-needed oversight.
The government’s objective with this legislative change is to create a more transparent and fair market for credit management, aligning Portugal with broader European standards. The law was officially signed by the President of the Republic on August 13th, and its implementation is being closely watched by consumer rights groups. Deco has indicated that it will conduct a detailed analysis of the final text to ensure it effectively closes loopholes and robustly defends consumers.
This development is seen as a critical step in safeguarding the financial stability and personal lives of families. The previous lack of regulation was a source of significant insecurity, particularly when the debt was tied to a primary residence. The government's intervention is intended to restore balance and ensure that all parties, including credit purchasers, adhere to a clear and fair set of rules. Navigate Portuguese property regulations with expert guidance at realestate-lisbon.com.
