The NPLs servicing market is currently dealing with loans of 20 billion Euros, but the vast majority of them are consumer loans without collateral. However, the volume of loans to be serviced will exceed 50 billion Euros in view of the large portfolios that will be sold directly or will be securitized by banks in the next two years, with a large share of housing loans or business loans with real estate collateral.
Servicing firms are coping with legal, business and operational factors hampering the efficient and effective portfolios’ servicing and return on investment. The human impact of the usual routes to debt recovery, such as collection calls and litigation procedures, and the debtors’ suspicion of investors and servicers add further impediments to debt collection.
Contrary to the banks, the Servicers, acting on behalf of the investors, have the autonomy and the flexibility to be distanced from lengthy and money consuming resolution strategies and apply new debt recovery methods, which can be designed, redesigned or adapted to meet the parties’ needs and the circumstances of each claim or segment of claims, offering the debtors a variety of sustainable solutions.
CEDR (UK) recently reported a massive ROI over 2016-2018, where £3 billion were saved and only £30 million were spent in Mediator fees. Although there are no relevant figures in the Greek NPLs servicing market so far, the aforementioned report sounds realistic, considering the fact that the mediation costs amount up to almost the 1/3 of the litigation costs.
Mediation, a bespoke alternative dispute resolution process, has not been exploited, so far, although provided by Law and the Banks’ Code of Conduct in arrears handling. In Mediation the parties explore all settlement options freely, without any commitment, and may opt out, at any time. The final outcome is decided by the parties and the settlement agreement is legally binding and enforceable, when contacted. The process establishes relationship, restores communication between the Servicer and the debtors, in the long term and adds value to the portfolio.
“Can all the claims be mediated?” and/or “Which claims are to be mediated?” are common questions. Truth is that there are no silver bullets and the answers always rest with the business decision. However, the awareness of the officers involved in resolution and the incorporation of mediation process in the Servicers’ internal policies and procedures are prerequisites for the Management to efficiently identify the criteria, determine the target levels and effectively draw mediation based recovery strategies.
Pelagia Christonaki
Attorney at Law, Accredited Mediator (CEDR), GDPR Expert