Response to consultation on Guidelines on complaints handling by credit servicers under CSD
Consultation question: Is there a reason why the requirements on complaints handling for credit servicers under Directive (EU) 2021/2167 should differ from the ones in the existing JC Guidelines on complaints handling that are applicable to other financial institutions across the banking, Investment and insurance sectors?
Overall, Intrum supports the proposal to apply the Joint Committee guidelines on complaints-handling for the securities and banking sectors (‘JC Guidelines’) also to Credit Servicers under the Credit Servicers Directive (CSD). The JC Guidelines correspond in principle to the internal rules on complaints handling which Intrum has applied across the group since almost ten years.
However, in order to avoid that the scope of application of the JC Guidelines becomes excessively wide in relation to the operations of Credit Servicers, we recommend clarifications to the definition of ‘Complaint’ as set out by the Proposed consolidated Joint Committee guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors (‘Proposed Consolidated JC Guidelines').
Based on the very nature of the business, Credit Servicers receive many unspecified statements of discontent from borrowers. Credit Servicers, as defined in the CSD, do not originate loans, conclude loan contracts, nor step into the creditor’s shoes in respect of credit agreements. As opposed to financial institutions in the banking, investment and insurance sectors, a Credit Servicer has not been chosen by the borrower as contractual party. Instead, borrowers only find themselves in contact with Credit Servicers after they have defaulted on their payment obligation to the point where their contractual partner (e.g. the bank) terminates the agreement, declares all outstanding amounts as immediately due and payable and sells the remaining claim. At this stage, it is to be assumed that no borrower is satisfied with the overall situation.
Furthermore, one must distinguish between, on the one hand, administering complaints relating to a creditor’s rights under a credit agreement or to the credit agreement itself, which form part of the Credit Servicing Activities, and, on the other, handling of Complaints regarding wrongdoings of the Credit Servicer.
A definition of Complaint as a mere ‘statement of dissatisfaction addressed to a firm by a natural or legal person relating to the provision of credit servicing activities as defined in Article 3(9) of CSD’ (as suggested in the Proposed Consolidated JC Guidelines) would very likely lead to an excessive demand and lead to an accrued use of resources both at Credit Servicers and at Competent Authorities. It could eventually harm the process to handle any substantiated Complaints towards Credit Servicers, which should be solved as soon as possible.
We therefore believe that it must be clarified that a Complaint shall only be triggered by a wrongdoing (alleged or occurred) of the Credit Servicer. To qualify as a Complaint brought towards a Credit Servicer, to which the JC Guidelines shall apply, the communication from the borrower should, as a minimum, contain a substantiated statement of why the borrower believes that he or she has not been treated correctly in accordance with applicable law and industry standards.
Intrum has long advocated for a clear and common borrower complaint definition that could be implemented throughout the EU. Harmonization in this area would be beneficial for borrowers and for the industry alike.
At present, Intrum applies internally, as general guidance and for the Intrum entities which do not have a regulated national definition, the following definition:
“Borrower Complaint means substantive and relevant remarks attributable to Intrum’s management of the services within the framework of its duties as a Credit Servicer. A disputed case by the borrower or general dissatisfaction is not considered in this context as a complaint, nor is dissatisfaction that must be considered to have little significance for the borrower.”
The purpose of this definition is to cover only wrongdoings by the Credit Servicer, and to exclude;
disputes and objections by borrowers to the payment obligations in relation to the debt in a case, which regard the actions and omissions of the creditor (i.e. the original creditor, the Credit Purchaser or other previous owner of the claim); and
- expressions of general dissatisfaction that must have little significance to the borrower, which relate more to the nature of the Credit Servicing business and not to actual wrongdoings by the Credit Servicer.
In summary, Intrum believes that it would be beneficial not only for the industry but also for the borrowers to differentiate the applicable processes at an early stage to clarify if the matter at hand relates to a valid Complaint, a legal appeal or general dissatisfaction. Hence, we would recommend the definition above.