The PASOK-Movement for Change Parliamentary Group submitted three amendments to the Ministry of Finance’s omnibus bill.
The amendments are as follows:
A. 120 installments
For the fifth time since December 2022, PASOK is reviving its proposal for a genuine 120-installment plan for debts owed to the tax authorities, EFKA, and municipalities.
1) For those who have not yet enrolled in a debt settlement plan: a new, sustainable repayment plan of up to 120 monthly installments with a down payment ranging from 0% to 5% on existing overdue debts owed to the Tax Administration, social security agencies, and municipalities.
This option is available for debts that have become due as of the date of enactment of this law. Enrollment in the arrangement under this article is permitted without an advance payment for debts up to 100,000 euros, while a 40–85% discount is provided on additional fees and surcharges depending on the number of installments used to settle the debt (the fewer the installments, the greater the discount). Specifically, in the case of a lump-sum payment of the entire debt within 30 calendar days of applying for the settlement, all surcharges and fines are waived.
The debt is divided into two parts, with the first amounting to 70% of the debt and the second to the remaining 30%. The first portion of the debt is subject to a repayment plan of up to 120 installments, while the second portion remains interest-free. Once the debtor completes repayment of the first portion in accordance with the established terms, the second portion, corresponding to 30%, is written off.
2) For those who had enrolled in a previous debt settlement plan and lost it: reinstatement of the old debt settlement plan.
B. Unseizable Business Bank Account
A special, unseizable business bank account is established for individuals and legal entities engaged in business or agricultural activities, including entities that operate agricultural holdings, as well as Producer Groups and Agricultural Cooperatives.
This account is intended exclusively for the collection of revenue from electronic transactions and for covering necessary obligations directly related to the continuation of economic activity. These obligations include, in particular, the payment of employee salaries, social security contributions, taxes, and other debts owed to the State, as well as the settlement of obligations to suppliers and other operating expenses.
C. Enhancement of Out-of-Court Mechanisms
A) Regarding the Code of Conduct:
- The proposed settlement will be reviewed on its merits, as creditors will be required to justify their rejection of borrowers’ counterproposals, while committees independent of banks or asset management companies will be established, to which borrowers may turn to seek an appropriate settlement or restructuring of their debt.
- Compliance with the Code of Conduct under Law 4224/2013 of the Bank of Greece is established as an obligation for Credit or Financial Institutions and Loan and Credit Claims Management Companies (E.D.A.D.P.) in their dealings with the Borrower. Henceforth, the Borrower has the right to demand that their creditor apply the Code of Conduct to their specific case. Failure to seek an appropriate settlement in accordance with the provisions of the Code entitles the Borrower to claim compensation for any damages suffered as a result, as well as to demand the annulment of any termination or enforcement actions taken against them.
- Credit or Financial Institutions and Loan and Credit Claims Management Companies (E.D.A.D.P.) are required to justify their decisions, based on the principles and criteria of the Code of Conduct, the debtor’s personal circumstances, changes in the debtor’s ability to repay debts, and the estimated cost of the credit to the creditor, while also taking into account the indicative list of solution types contained in Annex II of the Code of Conduct under Law 4224/2013, the proposed solution for restructuring or settling the debt, particularly when the borrower’s counterproposal is rejected. It is clearly unjustifiable, in the case of a borrower facing significant financial difficulties—which, incidentally, led to the loan being written off— for the Management Company acting on behalf of the fund to take an uncompromising stance regarding the amount or the duration of the repayment plan.
- Civil penalties are imposed on the creditor for violating its obligations under the Code of Conduct, such as the loss of the ability to proceed with enforcement actions and the forfeiture of claims for late-payment interest.
- The borrower is granted the right to appeal, in the event that they are not satisfied with the proposed settlement, to a committee outside the bank or management company—specifically, the Debt Settlement Committee established for this purpose—to seek an improved proposal. In particular, an amendment to Law 4224/2013 provides that debtors may appeal to the three-member debt settlement committees established in each Regional Unit by the General Secretariat for the Financial Sector & Private Debt Management.
B) Regarding the out-of-court mechanism under Law 4738/2020
Seven changes are being introduced to the operation of the out-of-court debt settlement mechanism, which are expected to significantly improve it.
First, creditor participation in the process is made mandatory. It is unthinkable for a creditor to exploit the out-of-court mechanism to gain access to all of the debtor’s confidential information without participating in the process.
Second, the settlement proposal generated by the out-of-court mechanism’s computational tool (platform) is brought to the debtor’s attention even if the creditor refuses to accept it. It constitutes a lack of transparency if debtors are not made aware of the platform’s proposals, which are non-binding on them.
Third, the creditor’s refusal to accept the proposal does not exempt them from the obligation to provide justification based on the principles and criteria of the Code of Conduct, as further elaborated, and to submit an alternative proposal.
Fourth, the terms for debt settlement are improved for vulnerable categories of debtors.
In principle, the income and asset thresholds applicable for issuing a certificate of vulnerable debtor status are set to increase by 25% in order to be adjusted in line with increases in the cost-of-living index from 2021 to the present. Otherwise, in real economic terms, the category of these vulnerable debtors has shrunk even further, and any protection afforded to them has been weakened compared to that of previous years. Furthermore, an annual cost-of-living adjustment to the above thresholds is hereby established. Debtors for whom the settlement proposal generated by the calculation tool is already binding on creditors—pursuant to Article 14(3) of Law 4738/2020—also benefit from this provision.
In order to prevent the phenomenon of crippling installment payments in the settlement plan for vulnerable debtors in particular, the weight of the income criterion is increased, thereby providing for the possibility of a reduction of up to 25% in the creditor’s recovery compared to the recovery that would result from the liquidation of the debtor’s assets. It should not be overlooked, moreover, that if a vulnerable debtor makes use of the option to transfer their residence to the Acquisition and Leaseback Agency, the latter will pay the creditors 70% of the property’s value.
It is further provided that interest-free installments may be arranged in cases of insufficient income.
Specifically, for farmers—as a minimal contribution to the protection of their profession and the sustainability of the arrangements—it is stipulated that the real estate value threshold applicable to the arrangements for vulnerable categories of debtors under paragraph 3 of Article 14 of Law 4738/2020 and the proposal generated by the calculation tool—which is binding on creditors—the value of farmland up to the amount of 50,000 euros shall not be taken into account.
Fifth, in this case as well, provision is made for the possibility of appealing to the independent Debt Settlement Committee under Article 1A of Law 4224/2013, as proposed above, which will issue a relevant recommendation regarding the conclusion and content of the restructuring agreement, taking into account a variety of factors, so as to arrive at a viable and realistic settlement.
Sixth, for creditors who refuse to comply with the obligations to participate and submit reasoned proposals, the penalty is that they may not, for at least one year, terminate a contract, initiate or continue enforcement proceedings, or claim default interest going forward.
Seventh, it is stipulated that if borrowers default on the repayment plan—provided they have adhered to it for three years—the reinstatement of debts not covered by the plan will be limited in proportion to the amount of debt covered by the plan that has been repaid. Unfortunately, many repayment plans are abandoned shortly after they begin.
C) Regarding measures to protect debtors’ rights vis-à-vis debt collection agencies.
In order for borrowers to be able to verify the amount of the claim asserted by debt collection agencies and to exercise their right to dispute it, they must receive detailed information regarding the history of their debt.
A general obligation is established for collection agencies to provide a level of service comparable to that provided by credit institutions.
Debt collection agencies are required to maintain offices or collaborate with bank branches in every regional unit, where debtors can go to receive assistance regarding issues related to their debt.
Debt management companies are required to maintain a file containing the complete case dossier and to provide the debtor, upon request, free of charge and within 20 days, copies of contracts or other documents relating to their debt, out-of-court settlements, or legal actions taken against them. At the same time, companies are required to keep on file every settlement proposal, along with its contents, regardless of its source, and to state the reasons for its rejection. Copies of these must also be provided to the debtor upon request.
Furthermore, it is expressly provided that terms in settlement agreements that acknowledge the outstanding balance of the debt require the prior provision of a detailed statement of the loan’s transaction history; and such statements are merely for evidentiary purposes and in no way impair the debtor’s right to dispute the amount of the debt.
It is expressly provided that payment orders or the initiation of enforcement proceedings are null and void when it is proven that they took place during the negotiations for the signing of a settlement agreement.