European regulators requested a plan for a consumer protection directive within the Union.

In Portugal, the main banks have been relying on the solution of selling non-performing credit to get rid of their non-performing credit for the past eight years, primarily in the context of mortgages. However, the Bank of Portugal does not oversee the non-financial companies purchasing these mortgages, leaving a gap in regulation.

This situation has raised concerns, as the sale of non-performing credit in mortgage cases can lead to a more complex situation for debtors. Debtors may receive a warning letter from banks about the cessation of credit, but the resumption of mortgage payments is not guaranteed when a non-financial company takes over the mortgage.

The European Union (EU) directive that protects consumers was supposed to be transposed into Portuguese legislation, but there have been delays. The decree that transposes the EU directive was finally approved in August, but it remains to be seen how it will impact the current practice of selling non-performing credit.

The Bank of Portugal is unaware of the amount of mortgages sold in credit cessation operations since 2017 to entities not supervised. The DECO statement identifies several banks repeatedly selling non-profitable mortgage loans to external companies over the past eight years, but it does not specify exact bank names or the precise amounts sold to unmonitored companies since 2017.

The lack of information regarding these sales has left consumers unprotected. The general credit rules for buying a house do not apply to these non-financial companies, adding to the confusion and uncertainty surrounding the practice.

As the situation continues, it is crucial that both consumers and the Bank of Portugal are provided with clear and transparent information about the sales of non-performing credit in mortgage cases to non-financial companies. This will help ensure that consumers are protected and that the practice is regulated effectively.