In a recent interview, Dr. Andreas Bücker, Director General of the Federation of European National Collection Associations (FENCA), shared his insights on the regulatory changes sweeping through Europe’s debt collection industry. With a focus on the EU’s Non-Performing Loans (NPL) Directive, advancements in AI, and upcoming consumer finance regulations, Dr. Bücker highlighted the potential impacts on collection and servicing companies across Europe.
The EU’s NPL Directive, intended to expand the secondary market for non-performing loans by promoting cross-border activities, has delivered unexpected challenges. Rather than easing cross-border operations, Dr. Bücker explained, the directive has led to a more burdensome regulatory landscape. With complex licensing requirements and additional administrative demands, many collection companies are struggling to adapt. For smaller players, these requirements could lead to market exits, ultimately stifling competition rather than encouraging it.
“The legislation’s impact has been quite the opposite of what was intended,” Dr. Bücker noted. “Instead of stimulating growth, the new regulatory barriers are likely to cause a decline in market participants willing to operate across borders.”
Shift in supervisory roles across Europe
In addition to the NPL Directive, another significant regulatory shift is occurring within the debt collection oversight framework. National financial authorities are increasingly taking on supervisory roles traditionally held by judicial bodies. For instance, while debt collection in Sweden and Denmark has been tightly regulated for some time, many other countries are now experiencing this administrative shift for the first time. This change, according to Dr. Bücker, could lead to a “more uniform but complex oversight process,” requiring companies to adjust to new licensing and regulatory expectations under national financial authorities rather than traditional courts.
The debt collection industry is also seeing the effects of the EU’s AI Act, which brings new guidelines on artificial intelligence in credit assessments. AI’s role in debt collection and creditworthiness evaluations is rapidly evolving, promising to improve transparency and customer experiences while prioritizing consumer protections, especially for vulnerable consumers. However, the AI Act requires strict oversight of AI algorithms used in these processes, pushing companies to ensure high standards of data accuracy and transparency in automated interactions.
Looking ahead, the EU is also expected to introduce tighter regulations in consumer finance, particularly with revisions to the Consumer Credit Directive and the Mortgage Credit Directive. The increased focus on mortgage lending is particularly relevant, as non-performing mortgages represent a substantial share of Europe’s outstanding debt. Dr. Bücker emphasized that these upcoming changes will likely reshape consumer finance across the continent, with implications for collection companies and lenders alike. While FENCA has successfully advocated against unnecessary regulatory overlap, the industry will still need to prepare for significant adjustments in both consumer and mortgage finance sectors.
The EU’s approach to late payment legislation in B2B scenarios could bring another transformation to debt collection practices. Although recent efforts to establish new B2B late payment regulations didn’t pass, Dr. Bücker noted that the proposal is likely to be revisited soon. This legislation would prioritize payments to small and medium-sized enterprises by public authorities and larger entities, potentially setting a standard for B2C transactions as well. Should this legislation pass, it may open the door to expanded debt collection protections in B2C contexts, bolstering consumer protections across various transaction types.
Dr. Bücker’s insights offer a preview of the dynamic regulatory changes ahead. As AI, supervisory reforms, and consumer protection regulations reshape Europe’s debt collection landscape, FENCA’s advocacy continues to focus on balancing industry growth with fair, transparent practices. With new legislation imminent and regulatory oversight intensifying, the debt collection industry is poised for transformation, and companies must stay prepared to adapt.