New: Secondary Credit Market Act ( KrZwMG)

Area of application

The KrZwMG is only applicable to non-performing loans (“NPLs”) that were originally granted by a credit institution and in which case the first acquisitions and/or transfer occurred after 30 December 2023. The definition of an NPL is laid down in Article 47a of Regulation (EU) No. 575/2013 and generally claims that are overdue for more than 90 days are considered NPLs.

Activities outside the EU, e.g. sale of NPLs by non-CRR-institutes, are not governed by the new regulation.

New obligations under the KrZwMG

The KrZwMG imposes new obligations on credit institutions as sellers of NPLs, buyers of NPLs and providers of credit services for buyers of NPLs.

Regulations concerning credit sellers

The seller of an NPL must provide a potential NPL buyer with information about the NPL or the claims of a lender arising from it before concluding an agreement.

Regulations concerning loan buyers

Loan buyers who are not themselves credit service providers (Kreditdienstleister) or are from a non-contracting state must commission a credit service provider when acquiring a NPL or the lender's claims arising from it, provided that the NPL was concluded with a natural person or a micro, small and medium-sized enterprise. If a credit service provider is commissioned, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and the Deutsche Bundesbank must be notified, and both must be provided with information on the credit service provider.

Authorization procedure under BaFin

The KrZwMG regulates the authorization procedure. Any domestic legal entity or commercial partnership that wishes to provide credit services in Germany on a commercial basis or to an extent that requires a commercially organized business operation requires a license from BaFin. For this purpose, the legal entity or commercial partnership must meet certain organizational requirements laid out in the KrZwMG. If credit services were already provided before the KrZwMG entered into force and the legal entity or commercial partnership intends to provide credit services for more than six months after the KrZwMG entered into force, BaFin must be notified informally.

Supervision by BaFin

Since the KrZwMG came into force, BaFin is responsible for the supervision of credit institutions, credit service providers and credit purchasers within the NPL market. In its supervisory function, BaFin can issue such orders to prevent or eliminate violations of the KrZwMG.

Deadlines

Companies that are already active in the NPL market and wish to continue to provide credit services in the future must observe modified submission deadlines:

Companies that already provided credit services before the KrZwMG entered into force may continue to do so without authorization until 29 June 2024. If a company intends to continue providing credit services after this date, BaFin and the Deutsche Bundesbank must be notified by 16 February 2024. The required information and documents must be submitted to BaFin by 5 April 2024.

Nevertheless, the notification of intent and complete documentation should be submitted to BaFin and the Deutsche Bundesbank as soon as possible.

Credit services within EEA

The “European passport” regulates the cross-border provision of credit services by companies based in other contracting states. Credit services institutions authorized in another contracting state can now provide cross-border services in the EEA without requiring additional authorization. If a domestic credit services institution intends to provide cross-border credit services in the EEA, it must notify BaFin and the Deutsche Bundesbank in good time.