Protecting homeloan borrowers in the emerging EU secondary market for non-performing loans

Purpose This paper aims to explain the provisions of the New Directive on Secondary Mortgage Markets, in particular it considers consumers protection issues and whether the principles of Life Time Contracts epitomise the proper balancing of principles underlying European law, now set out in the EU Charter of Fundamental Rights. Design/methodology/approach The present work outlines first the legacy of the European financial and mortgage crisis and the need for new rules on cross-border sales of non-performing loans (NPLs). Then it provides an overview of the Directive, analyses the complexity of the cross-border supervision and addresses consumer protection issues and the potential role the Life Time Contracts and the EU Charter of Fundamental Rights may play to protect consumers in this field. Findings The current paper shows that the provisions of the Directive, the Mortgage Credit Directive and the Consumer Credit Directive fail to protect consumer borrowers when NPLs are sold to third parties. Advancing this human rights protection could transcend the regulatory, legislative and consumer protection approaches of the Union in this area. Social implications The Directive establishes the regulatory and operational structures for the sale of NPLs. However, some important issues have been raised, including how the cross-border supervision will operate to protect consumers. Accordingly, the research may help to increase consumer protection in this field. Originality/value This paper explains the provisions of the New Directive on Secondary Mortgage Markets and its complex and unique cross-border regulatory framework, as yet untested. This work may serve as an inspiration for the EU to improve existing consumer rules at the EU level.