Greek rervicers warn new debt rules could delay recoveries and affect Hercules Securitisations

Ahead of the debate on the Ministry of National Economy and Finance’s draft legislation in the Plenary Session of the Hellenic Parliament, loan and credit servicers have expressed their support for measures aimed at enhancing transparency and supervision. However, they have also raised concerns about specific provisions which, in their assessment, could lead to further delays in debt management and recovery procedures.

Particular concern centres on the possibility that the mandatory implementation of the new bilateral restructuring procedure could delay enforcement proceedings already under way during 2027, potentially affecting the business plans of securitisations included in the government’s Hercules Asset Protection Scheme.

Reducing Private Debt and the Role of Servicers

EDADP points out that loan and credit servicing companies operate under the supervision of the Bank of Greece and within a strict institutional and regulatory framework. It clarifies that servicers do not own the loan claims themselves but manage portfolios on behalf of the investors who hold them and determine the corresponding credit policies.

Their operating framework is based on EU Directive 2021/2167, which was transposed into Greek law through Law 5072/2023. Additional requirements have also been introduced regarding licensing, supervision, debtor information and the submission of restructuring proposals.

According to Bank of Greece data cited by the Association, non-performing private debt declined from €118.5 billion in March 2016 to €82.8 billion in June 2026.

The reduction, it argues, was primarily driven by collections and consensual settlements, with servicing companies implementing debt restructuring arrangements amounting to approximately €7 billion annually. EDADP stresses that recoveries are generated mainly through consensual solutions rather than auctions, arguing that debtor protection and effective private debt management can coexist.

Where Delays Are Emerging Under the Hercules Scheme

Regarding the performance of securitisations included in the Hercules scheme, the Association maintains that deviations from business plan targets are not uniform but vary according to the category of recovery.

In particular, according to EDADP, servicing companies have achieved or exceeded their targets for loan restructurings. By contrast, underperformance is concentrated primarily in recoveries through enforcement proceedings, which are explicitly incorporated into the securitisation business plans.

The Association notes that accelerating consensual recoveries requires a relationship of trust between creditors and debtors, making transparency a fundamental prerequisite for effective debt management.

Support for Transparency Measures, Reservations over Penalties

Against this backdrop, servicers have expressed their unreserved support for the draft legislation’s provisions requiring creditors to provide debtors with copies of loan agreements, payment histories and a detailed breakdown of outstanding debt within 45 days.

They also welcome the publication of information on servicing companies’ activities, the introduction of clear deadlines through an electronic platform and enhanced regulatory supervision.

However, they have raised reservations regarding certain provisions governing the consequences of non-compliance. In particular, they refer to measures allowing interest accrual to be suspended or five instalments to be credited against the outstanding debt following a simple declaration by the debtor.

EDADP believes these provisions require careful consideration in terms of their implementation, particularly where automatic penalties may be imposed without a prior judicial ruling or assessment by the competent supervisory authority.

It warns that such measures could create opportunities for the exploitation of the regulatory framework and generate further disputes arising from differing interpretations.

The New Bilateral Debt Restructuring Procedure

The Association attaches particular importance to the introduction of the Bilateral Debt Restructuring Procedure, which is set to replace the Code of Conduct, describing it as a necessary additional tool for structured negotiations between debtors and creditors.

Nevertheless, it stresses that the effectiveness of the new framework will depend on the coordination of the different debt restructuring mechanisms currently available.

Specifically, the new procedure should operate alongside the Out-of-Court Debt Settlement Mechanism and the obligation to submit a restructuring proposal before proceeding with an auction.

According to EDADP, the objective should be to prevent overlapping procedures, additional delays and delaying tactics by certain debtors.

The Association also acknowledges that the new procedure will be mandatory for all debtors, irrespective of any previous restructuring arrangements or negotiations.

Combined with the time required to develop and implement the electronic platform envisaged under the legislation, this requirement could result in delays to enforcement proceedings already under way during 2027.

As the Association warns, these developments could also affect the business plans of the Hercules scheme. EDADP nevertheless believes that any potential negative impact could be offset if the new procedure results in an increase in consensual debt restructuring agreements.

Protection of Vulnerable Borrowers and the Issue of Enforceable Titles

In its intervention, the Association also refers to the existing framework for protecting vulnerable borrowers and persons with disabilities through the Out-of-Court Debt Settlement Mechanism, the Interim Programme and the Real Estate Acquisition and Leaseback Entity.

It notes that servicing companies have contributed to the implementation of these mechanisms, while emphasising that fixed-interest-rate arrangements help these social groups plan their finances more effectively and reduce the risk of default.

At the same time, EDADP comments on the State’s decision not to incorporate a provision concerning enforceable titles into the draft legislation.

It argues that the issue does not concern the introduction of a new legal instrument, since enforceable titles are already provided for under the existing institutional framework, including through notarial deeds and settlement agreements or mediation records.

Particular reference is made to the Legislative Decree of 1923, which recognises mortgage loan agreements concluded with banks as enforceable titles, without requiring the prior issuance of a payment order.

According to the Association, when a debtor freely accepts a debt restructuring arrangement following negotiations, there is, in principle, no reason to require a further judicial procedure to recognise a debt that the debtor has already acknowledged.

It nevertheless stresses that the debtor’s legal safeguards remain fully intact, including the right to challenge the debt before the courts and contest the various stages of enforcement proceedings.

Concerns over Fines and the Culture of Payment

Finally, EDADP describes the new framework for imposing fines as particularly stringent, noting that it ranks among the strictest regulatory penalty regimes applied to sectors of the Greek economy.

The Association cites data indicating that debtor complaints account for less than 1% of the cases under management, while customer service indicators have improved significantly.

It therefore calls for the application of sanctions to take into account the overall performance of the sector rather than isolated cases.

Ultimately, the Association’s central message concerns the need to preserve the culture of payment that has developed in recent years following the prolonged economic crisis.

As it argues, reforms should strengthen protection for genuinely vulnerable debtors and facilitate consensual debt settlements, without creating incentives for strategic defaulters.