RACE – Bank Customer Support Network

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RACE – is a network made up of several entities, recognized by the Bank of Portugal and the General Consumer Directorate, which aims to inform, advise and support customers who are at risk of default or who is already, in fact, failing to fulfill its responsibilities towards the Bank.

RACE is a service provided by CIAB in the region and aims to support customers in terms of debt and over-indebtedness.

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Support for non-compliance issues

Support programs for resolving non-compliance problems

The scope of action includes two regimes that differ according to the level of severity of the situation:

– Customers at risk of non-compliance, who are finding it increasingly difficult to meet their commitments, may be covered by PARI;

– Customers who are already in non-compliance on one or more credits may be included in PERSI;

CIAB was one of the first entities at national level to be recognized and to implement a project in its area of coverage with two fundamental aspects:

Promote the population’s financial literacy through a set of dissemination initiatives, namely carrying out awareness and information actions with various institutions: Municipal Councils in the CIAB’s area of intervention, IPSS’s, Schools, Training Centers, among others.

Provide support to customers at risk of non-compliance or in actual non-compliance, through specialized technicians who provide information and support bank customers who use their services.

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Legal support instruments

There are currently several legal instruments designed to support customers at risk of non-compliance, that is, who are experiencing difficulties in meeting their banking commitments, which may be covered by the PARI (Action Plan for the Risk of Non-compliance), or who already are in non-compliance on one or more credits and which can be included in PERSI (Extrajudicial Procedure for Regularizing Non-compliance Situations).

PARI – Action plan for the risk of non-compliance

Recipients: Bank customer in risk of non-compliance (unemployment situation, illness).

General Procedures

1

Bank costumer alerts the credit institution to the risk of non-compliance.
2

The Banking institution must provide a document informing them of their rights and duties.
3

The financial institution must assess the financial capacity of the bank customer and if it determines that the customer has the means to avoid non-compliance, it must provide them with circumstances appropriate to their financial situation as well as objectives and needs.

PERSI – Extrajudicial procedure for regularizing non-compliance situations

Recipients: bank customers who are late in fulfilling their credit contracts (covers all types of contracts).

General Procedures

1

Inclusion in PERSI does not depend on any access or request submitted by the customer.
2

The banking institution must provide a document informing them of their rights and duties.
3

The financial institution must assess the financial capacity of the bank customer and must present one or more restructuring proposals appropriate to their financial situation.

Guarantees during negotiation

During negotiation, the credit institution is prohibited to:

Proceed with the termination of the credit agreement

Promote legal action against the bank customer with the intent to recover their credit

Assign the credit in question to third parties

Questions and Answers

What is the debt support network?

The Bank Customer Support Network is the set of entities that, under the terms and under Decree-Law n.º 227/2012, of October 25^th, and ordinance n.º 2/2013, of January 2^nd, after recognition from the General Directorate of Consumer Affairs, they are part of a network to inform, advise and monitor bank customers (hereinafter consumers).

What type of action is expected from CIAB within the scope of RACE?

The scope of action of the entities that make up the Network is defined in accordance with article 27º of Decree-Law n.º 227/2012, of October 25^th, and, specifically, these entities must:

– Inform consumers about their rights and duties in case of risk of non-compliance on the credit agreement;

– Support consumers in analyzing the proposals presented by credit institutions within the scope of the procedures set out in Decree-Law n.º 227/2012;

– Monitor consumers in negotiations between them and credit institutions;

– Provide information on debt and support consumers in assessing their debt capacity;

– Provide quality, impartial and transparent information to support consumers in analyzing credit, investment (financial applications) and insurance proposals in accordance with the rules of the BEUC (The European Consumer Organization) through the ConFinAd (Consumer Financial Advice) program.

– Apoiar os consumidores na análise das propostas apresentadas pelas instituições de crédito no âmbito dos procedimentos previstos no Decreto-Lei n.º 227/2012;
– Acompanhar os consumidores em sede de negociação entre estes e as instituições de crédito.
– Prestar informações em matéria de endividamento e apoiar os consumidores na avaliação da capacidade de endividamento
– Prestar informação de qualidade, isenta e transparente de apoio aos consumidores na análise de propostas de crédito, de investimento (aplicações financeiras) e seguros segundo as regras do BEUC (The European Consumer Organization) através do programa ConFinAd (Consumer Financial Advice).

What is the applicable legislation?

The Network was created by Decree-Law n.º 227/2012, of October 25^th, and its regulations are found in Ordinance n.º 2/2013, of January 2^nd.

Can the entities that are part of the support network for indebted consumers, within the scope of their activities, represent the consumer before the credit institution?

No! The entity that forms part of the Network is prohibited from acting in the name or on behalf of the consumer. Negotiation within the scope of the procedures set out in Decree-Law n.º 227/2012 takes place between the credit institution and the consumer who is in non-compliance, but this does not prevent the entity that is part of the Network from being able to monitor the consumer in negotiation, in fact, it constitutes one of the duties provided for in article 27º of Decree-Law n.º 227/2012.

What is the action plan for the risk of non-compliance (PARI)?

The Action Plan for the Risk of Non-compliance (PARI), mandatory for all credit institutions, is a procedure that is provided for in Decree-Law n.º 227/2012, of October 25^th and includes:

– The procedures that must be adopted to permanently monitor the execution of credit contracts;

– Facts that can be considered as signs of the degradation of the bank customer’s financial capacity;

– Solutions that can be proposed to customers who are at effective risk of non-compliance.

What is the extrajudicial procedure for regularizing non-compliance situations (PERSI)?

Within the scope of the legal regime provided for in DL n.º 227/2012, when the consumer is in non-compliance in fulfilling the obligation arising from the credit agreement, the credit institution is obliged to carry out a series of steps in order to determine the reasons of this non-compliance and if it is verified that the consumer has the financial capacity, it adopts the so-called “extrajudicial procedure for resolving a situation of non-compliance” (hereinafter PERSI).

According to PERSI, the credit institution, after analyzing the situation and concluding that the consumer has the financial capacity to comply with obligations, presents him with one or more regularization proposals suited to his financial situation, objectives and needs.

What are the PERSI phases?

PERSI is made up of three phases:

– Initial phase – After a first contact with the customer to inform them of the delay in non-compliance and if this continues, the bank customer is obligatorily integrated into the PERSI between the 31st day and the 60th day following the due date of the obligation in question;

– Assessment and proposal phase – The credit institution assesses the bank customer’s financial capacity. If you conclude that the bank customer has financial capacity, you must present one or more appropriate regularization proposals;

– Negotiation phase – If the customer rejects the proposals presented to them, the credit institution must present a new proposal, when it considers that there are other alternatives.

Are the PARI and PERSI procedures provided for in decree-law n.º 227/2012 subject to any additional regulations?

Yes, right away they are subject to Banco de Portugal Notice n.º 17/2012, which sets out the duties of credit institutions in the context of prevention and extrajudicial regularization of situations of non-compliance with credit contracts concluded with private bank customers within the scope of PARI and PERSI procedures.

Are there other protection mechanisms for consumers who find themselves in a difficult economic situation?

Yes, there are certain mechanisms established on an extraordinary and temporary basis and which were recently published through Laws of the Assembly of the Republic, namely:

– Law n.º 57/2012, of November 9^th – Provides for the possibility of using savings to support the needs to fulfill financial obligations with credit institutions, within the scope of credit contracts for own and permanent housing;

– Law n,.º 58/2012, of November 9^th – Establishes a set of protection measures applicable to households that meet certain requirements set out in the Law.

Protective measures are:

– Plan for restructuring debts arising from housing loans;

– Complementary measures to the restructuring plan;

– Measures to replace mortgage foreclosure (payment in compliance with the mortgaged property, sale of the FIIAH property, exchange).

(Regarding the articulation between the regime provided for in Law n.º 58/2012, of November 9^th and the Extrajudicial Procedure for Regularizing Default Situations (PERSI), Circular Letter n.º 93/2012/DSC from the Bank was published of Portugal, which is available at http://clientebancario.bportugal.pt )

Law n.º 59/2012 of November 9^th – Creates safeguards for mortgage loan borrowers. As part of the loan approval process, the risk profile of each credit operation is taken into account.

DGC will, if necessary, complete the Questions and Answers now presented if they are eventually raised.