In Greece, during the last decade, as a result of the serious economic crisis that the country faced, a huge percentage of non-performing loans was created. There are loans that have not been serviced for over 10 years. There are borrowers who have passed away, have moved and no longer live in Greece, borrowers without any assets and unsecured loans. Due to the recent pandemic, there are fears for the creation of a second wave of overdue loans.
Are there strategic defaulters? People who have the money but do not pay their loans? Unfortunately, yes. Identifying these people is not always easy. During the last decade, the state provided the borrowers with a basic tool, Law 3869/2010 or else Katseli’s law, which helped serious borrowers, the life of which was dramatically changed. However, by this law loans “froze” for a decade or strategic defaulters “hid” behind it.
It is high time we seriously dealt with and resolved this problem without letting any more time go to waste. We are in the middle of the processing period of a new bankruptcy law for natural and legal persons. It must be clear that the stage of the loan’s negotiation process of a borrower with the Bank is a right that the state must not overlook before mandatory provisions of law are applied.
In my opinion, at this point banking mediation is a valuable tool. Mediation is a form of assisted negotiation. In simple words, the accredited mediator, by being a neutral person, helps the parts negotiate in a manner most beneficial for them.
How is banking mediation actually performed?
The borrower must necessarily have a lawyer. Why is that?
The lawyer supports the borrower. He is capable of understanding economic and legal terms that a borrower without financial literacy, not being familiar with the new technology and under the pressure of the economic situation may not comprehend. Borrowers are now people of older age as in the last decade no loans were granted; they were granted ten or even fifteen years ago. Borrowers have been trying for over a decade with these unsettled loans and may find it difficult to cope with the current situation. Let us not forget that the main legal argument of Swiss franc borrowers when they brought legal actions before Court was the lack of sufficient information they had received by bank employees regarding exchange rate change risks. In a mediation, where the presence of a lawyer and mediator is required and everything is made clear and explained, there is no space for such an argument, meaning “I did not understand the obligations I undertook when I signed the loan agreement”.
Before mediation is performed, there is a stage of processing of the borrower’s financial data, his application and his capacities by the Bank. This preparation stage is the most significant since it can be identified if there is scope for convergence, because if the borrower’s expectations are not realistic, for example he wishes a 95% debt remission, then the process is discontinued.
On the day of mediation, the borrowers, their lawyer, the Bank’s representatives along with their lawyer as well as the accredited mediator are present. Mediation lasts 8-10 hours. The parties come together in a common meeting, submit their proposals and are then separated in different rooms and the mediator conveys the different proposals of the parties. The borrower’s side is the weakest in banking mediation and the most significant and beneficial part of the process is that he has professionals by his side, a lawyer and a mediator that help him understand the Bank’s proposals, the obligations he undertakes, the benefits of this agreement and other better alternatives available in case the mediation is unsuccessful, whereas the final version of the agreement, the new loan regulation agreement that will bind him for years, is checked.
Proposals and counter-proposals of the parties are submitted, thorough discussions are made, while in case an agreement is reached, the new regulation is formulated and signed on the same day. A list of accredited mediators in Greece is available at www.diamesolavisi.gov.gr.
Up until today, part of banking mediation is performed by DoValue Greece, managing company of Eurobank’s securitized loans for two years now. The largest amount of banking mediations performed is successful. Personally, as a lawyer and mediator, I have participated in twenty mediations, negotiating loans amounting from 200,000 to 1,000,000 euro. This indicates that mainly for high borrowing regulations, mediation can be an extremely useful process. All my mediations were successful. In some of them a partial debt remission was achieved, while in all of them the shaping of a viable monthly installment and favorable rate for the borrower was provided. It is also important that all regulations achieved through mediation are respected, since it has been noted that although regulations are signed, in the end borrowers do not comply with them.
In the reasonable question: “Why is banking mediation required and why can it not be performed directly by the platform or by telephone or by a bank employee?” the answer is as follows.
Borrowers do not have the financial literacy to understand their creditor’s proposals. As experience has shown, most of the times they cannot handle the “Special Secretariat for Private Debt Management” platform and just start using it without meeting the criteria needed, without understanding much and therefore they quit. The regulations are now managed by servicers, meaning managing companies which do not come in direct contact with the borrowers. Borrowers turn to bank branches where the employees are not properly trained for regulations, are not qualified for this or do not devote much time to inform and explain to the borrower (who may tire them or react badly) which regulation he signs.
On the other hand, banking mediation gives the time, technical and human support to the borrower to negotiate and realize the position he is in, the obligations he undertakes and the consequences of not finding a solution.
Let us hope that the best possible solution for overdue loans is found.