Notice No. 7/2021

Notice of the Bank of Portugal
No. 7/2021
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Published in: DR, 2nd Series, No. 243, Part E, of 17-12-2021 Mod. 99999910/T – 01/14

Index
Text of the Notice
Annex I to the Notice
Annex II to the Notice

Text of the Notice

The general regime for default, approved by Decree-Law No. 227/2012 of 25 October, establishes the principles and rules that credit institutions must observe in the monitoring of situations of default risk and in the out-of-court regularization of default of obligations arising from credit contracts concluded with retail banking customers.

The aforementioned legal instrument provides that credit institutions create an Action Plan for Default Risk (PADI), setting out procedures and measures for the prevention of default on credit contracts, and establishes an Out-of-court Procedure for the Regularization of Default Situations (OPERSI), which aims to promote negotiation, between the credit institution and the retail banking customer, of out-of-court solutions for situations of default. Complementarily, the bases are set for the development of an out-of-court network of recognized entities to, free of charge, inform, advise and follow up retail banking customers who are at risk of defaulting on the obligations arising from credit contracts or who are in arrears regarding the fulfillment of these obligations.

The Bank of Portugal regulated various aspects of the general default regime through Notice No. 17/2012. However, the entry into force of Decree-Law No. 70-B/2021 of 6 August, which carried out the first amendment to the general default regime, makes it necessary to modify the aforementioned regulatory framework.

Through this Notice, the duties that credit institutions must observe in the context of the prevention and out-of-court regularization of situations of default on credit contracts concluded with retail banking customers are concretized, revoking Notice No. 17/2012.

Notice of the Bank of Portugal No. 7/2021
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Mod. 99999910/T – 01/14

In particular, the information that institutions must disclose to the public regarding the default of credit contracts and the out-of-court support network is established, and rules and criteria are defined for contacts with retail banking customers at risk of default or in arrears in the fulfillment of their obligations, as well as for the assessment of their respective financial capacity.

Additionally, the requirements that must be taken into consideration in the elaboration and implementation of the PADI and in the application of the OPERSI are specified. Within the scope of the PADI, the minimum periodicity with which institutions must carry out diligence to identify signs of deterioration of the financial capacity of retail banking customers is established.

The rules and procedures necessary for the operationalization of the reporting to the Bank of Portugal of the PADI and of the internal document drawn up by credit institutions regarding the implementation of the OPERSI are also fixed.

This Notice was subject to public consultation, in accordance with the provisions of Article 101 of the Administrative Procedure Code.

Thus, in the exercise of the competence attributed to it by the provisions of Articles 6, paragraph 2, 7, paragraph 2, 9, paragraph 1, 11, paragraph 4, 14, paragraph 5, 15, paragraph 2, 17, paragraph 5, 33, paragraph 1, and 38 of Decree-Law No. 227/2012 of 25 October, the Bank of Portugal determines the following:

Chapter I – General Provisions

Article 1.
Object

This Notice concretizes the duties that, by virtue of the provisions of Decree-Law No. 227/2012 of 25 October, institutions are obliged to observe in the context of the prevention and out-of-court regularization of situations of default on credit contracts, namely with regard to:
a) The disclosure to the public of information regarding the default of credit contracts and the out-of-court support network for retail banking customers; b) The procedures to be implemented by institutions in the context of the elaboration and application of the Action Plan for Default Risk (PADI) and the application of the Out-of-court Procedure for the Regularization of Default Situations (OPERSI);

Notice of the Bank of Portugal No. 7/2021
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Mod. 99999910/T – 01/14 c) The minimum regularity with which institutions must carry out diligence to identify signs of deterioration of the financial capacity of retail banking customers; d) The provision of information to retail banking customers during the OPERSI; e) The reporting to the Bank of Portugal of the PADI and of the internal document that describes the procedures adopted in the context of the implementation of the OPERSI.

Article 2.
Definitions

1. For the purposes of this instrument, the following are understood by:
   a) "Institution": credit institutions, financial companies, payment institutions and electronic money institutions; b) "Out-of-court support network": the out-of-court network composed of consumer conflict information and arbitration centers and by other entities recognized by the General Directorate of Consumer Affairs to provide, free of charge, information, advice and follow-up to retail banking customers who are at risk of defaulting on the obligations arising from a credit contract or who are in arrears in the fulfillment of these obligations; c) "General regime for the prevention and regularization of default on credit contracts": the legal regime that establishes the rules and principles that institutions must observe in the context of the prevention and out-of-court regularization of situations of default on credit contracts concluded with consumers and that creates the bases for the development of the out-of-court support network, approved by Decree-Law No. 227/2012 of 25 October.

2. Without prejudice to the provisions of the preceding paragraph, the concepts used in this Notice must be interpreted with the meaning attributed to them in the general regime for the prevention and regularization of default on credit contracts.

Chapter II – Management of default on credit contracts

Section I – Common Provisions

Article 3.
Disclosure to the public of information on the default of credit contracts and the out-of-court support network

1. Institutions must ensure the disclosure to the public of information on the default of credit contracts and the out-of-court support network.

2. For the purposes provided for in the preceding paragraph, institutions, through their counters, must deliver to retail banking customers, whenever they request it, an informational document, on paper, containing the information provided for in Annex I to this Notice, which forms an integral part thereof.

3. Institutions must make available the informational document referred to in the preceding paragraph, regardless of prior request, when the retail banking customer alerts the workers involved in customer service, at the counters or through distance communication means, to the risk of default of the obligations arising from a credit contract or transmits facts that indicate the deterioration of their financial capacity.

4. The informational document referred to in paragraph 2 must also be made available in a specific and autonomous area of the institutions' websites, with adequate prominence on their entry page and direct access by interested parties, without the need for prior registration, as well as in a prominent location in home banking and mobile applications, when they exist.

Article 4.
Use of default management service providers

1. Institutions may only resort to default management service providers in the context of collecting information about the retail banking customer and for carrying out contacts with the retail banking customer.

2. Institutions must ensure that default management service providers have the organization and the human and technical means adequate for the performance of the functions referred to in the preceding paragraph, as well as to make reflect in the service provision contracts concluded with these entities the obligations arising from the general regime for the prevention and regularization of default on credit contracts and this Notice.

Notice of the Bank of Portugal No. 7/2021
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Mod. 99999910/T – 01/14

Article 5.
Contacts with retail banking customers at risk of default or in arrears in the fulfillment of obligations arising from credit contracts

1. In cases where the general regime for the prevention and regularization of default on credit contracts does not require communication in a durable medium, institutions, within the scope of the procedures provided for in the PADI and during the OPERSI, may contact retail banking customers in person or through any distance communication means.

2. Institutions and, if applicable, default management service providers, must refrain from carrying out unfair, excessive or disproportionate contacts with retail banking customers at risk of default or in arrears in the fulfillment of obligations arising from credit contracts.

3. For the purposes provided for in the preceding paragraph, contacts, whether in person or carried out through any distance communication means, are considered unfair, excessive or disproportionate, among others, those that:
   a) Transmit to the retail banking customer incorrect, imprecise or misleading information; b) Do not precisely identify the institution or the default management service provider or do not indicate their respective contact details; c) Have an aggressive or intimidating tone; d) Occur during the hours between 22:00 and 9:00 of the retail banking customer's time zone, unless there is prior and express agreement by the same; e) Are directed to an address, telephone number or other contact element that has not been made available by the retail banking customer to the institution, unless the contact element relating to the retail banking customer is accessible to the public.

Article 6.
Assessment of financial capacity

1. Whenever, in accordance with the provisions of the general regime for the prevention and regularization of default on credit contracts, it is necessary to proceed to the assessment of the financial capacity of the retail banking customer, institutions must, among other elements they deem relevant, take into consideration the following factors:
   a) Age, family and professional situation of the retail banking customer; b) Income earned by the retail banking customer, namely by way of salary, remuneration for the provision of services or social benefits; c) Expenses of the retail banking customer, namely with obligations arising from credit contracts, including those concluded with other institutions; d) Default by the retail banking customer of credit contracts concluded with other institutions.

2. When this is strictly necessary and adequate to the assessment of the financial capacity of the retail banking customer, institutions may request proof of the information provided, namely through the delivery of the following documents:
   a) Last tax clearance certificate for individual income tax available; b) Copy of documents proving the income earned by the retail banking customer, namely by way of salary, remuneration for the provision of services or social benefits; c) Written declaration by the retail banking customer, attesting to the veracity, completeness and currency of the information provided.

3. In addition to the information obtained from the retail banking customer, institutions may seek to obtain other information necessary and adequate to the assessment of the financial capacity of the retail banking customer, namely through consultation of credit liability databases with adequate coverage and informational detail to substantiate this assessment, in accordance with the provisions of current legislation, or through consultation of other databases, internal or external, considered useful for this purpose.

Section II – Management of default risk

Article 7.
Monitoring the execution of credit contracts and prevention of default

1. With a view to ensuring the permanent and systematic monitoring of credit contracts concluded by them and promoting the prevention of default of obligations arising from these credit contracts, institutions carry out, with a minimum monthly regularity, the diligence necessary to identify signs of deterioration of the financial capacity of the retail banking customer to fulfill the obligations arising from these credit contracts.

2. For the purposes provided for in the preceding paragraph, institutions are also obliged to:
   a) Implement computer systems that allow the timely identification of the occurrence of facts that indicate the deterioration of the financial capacity of the retail banking customer and that emit alerts of this situation to the structures specifically indicated in the PADI for this purpose; b) Define the procedures to be observed by workers involved in customer service, in person or through distance communication means, when they become aware of facts that indicate the deterioration of the financial capacity of the retail banking customer, which must, namely, establish the obligation to communicate this information to the structure responsible for its treatment and analysis and to comply with the provisions of Article 3, paragraph 3, of this Notice; c) Develop mechanisms that favor communication by retail banking customers of situations of difficulty in fulfilling the obligations assumed, namely through the creation of specific channels on their websites, in home banking and in mobile applications, when they exist; d) Guarantee the integrated treatment of information collected about the retail banking customer who presents signs of deterioration of financial capacity or who directly alerts to the existence of risk of default of these obligations and ensure its availability to the competent structures; e) Define the competent structures for the exercise of the following functions, identifying their managers and their respective contact details:

Notice of the Bank of Portugal No. 7/2021
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Mod. 99999910/T – 01/14 i) Collection of information relating to the retail banking customer; ii) Treatment and analysis of this information; iii) Assessment of default risk; iv) Assessment of the financial capacity of the retail banking customer; v) Decision on the presentation of proposals to the retail banking customer and on the content of these proposals; vi) Carrying out contacts with the retail banking customer; vii) Provision to the Bank of Portugal of information relating to the elaboration and implementation of the PADI, to the changes that may be introduced over time, as well as to the results of its application.

3. Institutions must ensure that the structure designated as responsible for the function provided for in sub-alinea vii) of alinea e) of paragraph 2 has the technical and human means, as well as all the information necessary for the fulfillment of this function.

4. It is considered that signs of deterioration of the financial capacity of the retail banking customer to fulfill the obligations arising from the credit contract are verified whenever, in light of the available information, it is foreseeable that the retail banking customer will default on the aforementioned obligations, taking into consideration, among others, the facts contained in paragraph 4 of Article 9 of the general regime for the prevention and regularization of default on credit contracts.

5. Institutions must specify in the PADI the elements provided for in this article.

Section III – Out-of-court regularization of default situations

Article 8.
Communication of the start of the OPERSI

1. The communication by which the institution informs the retail banking customer of the start of the OPERSI must contain, in clear, rigorous and easily legible terms, the following information:
   a) Identification of the credit contract; b) Due date of the obligations in arrears; c) Total amount in debt, with a detailed description of the amounts relating to capital, interest and charges associated with the arrears; d) Date of integration of the retail banking customer into the OPERSI; e) Contact details of the institution that the retail banking customer must use to obtain additional information and to negotiate any solutions for the regularization of the default situation that may be proposed to them.

2. In addition to the information provided for in the preceding paragraph, institutions must accompany the aforementioned communication with an informational document drawn up in accordance with the model contained in Annex II to this Notice, which forms an integral part thereof.

Article 9.
Communication of the extinction of the OPERSI

The communication by which the institution informs the retail banking customer of the extinction of the OPERSI must contain, in clear, rigorous and easily legible terms, the following elements:
a) Description of the facts that determine the extinction of the OPERSI or that justify the institution's decision to terminate the aforementioned procedure, with indication of the respective legal basis; b) Identification of the consequences of the extinction of the OPERSI in cases where an agreement has not been reached between the parties, reference being made, in particular, to the possibility of contract termination and judicial enforcement of credits and the conditions that, according to the legal regime applicable to the credit contract in question, must be met for the institution to proceed to the termination of that contract; c) Presentation of information on the provisions provided for in Decree-Law No. 74-A/2017 of 23 June, regarding the right to take back the credit contract, when it concerns a housing credit contract; d) Identification of the situations in which the retail banking customer may request the intervention of the Credit Mediator while maintaining the guarantees associated with the OPERSI; e) Indication of the contact details of the institution through which the retail banking customer can obtain additional information or negotiate solutions for the regularization of the default situation.

Article 10.
Procedural duties

1. In the context of the implementation of the OPERSI, institutions are obliged to:

Notice of the Bank of Portugal No. 7/2021
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Mod. 99999910/T – 01/14 a) Guarantee the integrated treatment of information collected about retail banking customers in the OPERSI, ensuring the transmission of this information to the structure responsible for its treatment and analysis; and b) Define the structures responsible for the following diligence:
i) Collection of information relating to the retail banking customer; ii) Treatment and analysis of this information; iii) Assessment of the default situation; iv) Assessment of the financial capacity of the retail banking customer; v) Decision on the presentation of proposals to the retail banking customer and on the content of these proposals; vi) Carrying out contacts with the retail banking customer; vii) Provision of information to the Bank of Portugal regarding the implementation of the procedures associated with the OPERSI and the results of its application.

2. Institutions must ensure that the structure designated as responsible for the function provided for in sub-alinea vii) of alinea b) of the preceding paragraph has the technical and human means, as well as all the information necessary for the fulfillment of this function.

3. Institutions must specify the elements indicated in paragraph 1 in the internal document that describes the procedures adopted in the context of the implementation of the OPERSI, identifying the managers of the competent structures for the functions provided for in alinea b) of paragraph 1 and their respective contact details.

Chapter III – Reporting of information to the Bank of Portugal

Article 11.
Reporting of the implementation documents of the PADI and the OPERSI

1. By February 1, 2022, institutions must send to the Bank of Portugal the internal documents that describe the procedures adopted in the context of the implementation of the PADI and the OPERSI, in "Word/pdf" file format, via the BPnet portal (www.bportugal.net), through the "Default Reporting" service available in the "Behavioral Supervision" thematic area.

2. The aforementioned files must be sent by file transfer with the names "PADI_XXXX_DDMMYYYY.docx/pdf" or "OPERSI_XXXX_DDMMYYYY.docx/pdf", corresponding XXXX to the code of the credit institution, DD to the day, MM to the month and YYYY to the year to which the information refers, for example "PADI_0000_01022022.pdf".

3. Institutions must also report to the Bank of Portugal, with a minimum advance of 15 days relative to the date scheduled for its application, any change introduced to the documents referred to in paragraph 1, incorporating into the document to be reported a description of the changes made and the indication of the date of its application.

Article 12.
Repealing Provision

Notice of the Bank of Portugal No. 17/2012 is revoked.

Article 13.
Entry into force

This instrument enters into force on January 1, 2022.

December 7, 2021. - The Governor, Mário Centeno.

Annex to the Notice of the Bank of Portugal No. 7/2021
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Annex I to the Notice
Information to be disclosed to the public on the default of credit contracts and the out-of-court support network

Annex II to the Notice
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