The Ministry of National Economy and Finance is proposing a new framework for borrowers with overdue loans, aimed at curbing excessive interest charges, speeding up bilateral debt restructuring agreements and placing limits on the claims made by banks, investment funds and loan servicers.

The draft legislation is currently open for public consultation until 22 October. Speaking to the Athens-Macedonian News Agency (AMNA), Theoni Alampasi, Secretary-General for the Financial Sector and Private Debt Management, said the ministry’s aim was to deliver “less uncertainty for borrowers, greater accountability for creditors and a private debt restructuring system that operates according to clear rules and produces real solutions”.

At the heart of the proposed measures is the introduction of a cap on the total amount that can be claimed on loans of all types. The total claim will no longer be allowed to exceed two or three times the original principal, depending on the circumstances. The limit will apply automatically and cover consumer, mortgage and business loans, regardless of whether the claim has been transferred, securitised or assigned to a loan servicing company.

The measure will directly affect thousands of borrowers with long-standing debts owed to banks, investment funds and servicers, particularly those who have accumulated substantial liabilities from agricultural, business or mortgage loans. Even if a loan or credit facility has been overdue for years or decades, the claim will not be allowed to exceed three times the original principal, while debts owed by farmers will be capped at twice that amount.

Up to €200,000 less in interest and a brake on foreclosures

Under the proposed rules, once the law comes into force, the outstanding claim will not be allowed to exceed three times the original principal of each loan or credit facility, or three times the combined original principal of multiple loans or credit facilities. In the case of an open current account, the cap will be calculated on the basis of the debt as it stood at the account’s most recent disbursement.

For old debts owed by farmers, the total amount will not be allowed to exceed twice the original principal. In the case of open current accounts, the limit will be twice the debt as calculated at the most recent disbursement.

For loans granted before 1990, where sufficient records are unavailable to establish the original principal, the total debt will not be allowed to exceed 150% of the amount outstanding under the last restructuring agreement concluded before 1990.

In practice, this means borrowers will be released from any amount exceeding the applicable cap, which will generally consist of default interest, capitalised interest and other charges.

For example, on a loan originally worth €100,000, the debt will be capped at €300,000. If it has risen to €500,000, the additional €200,000 will no longer be recoverable. For farmers, the claim will be capped at €200,000.

If €80,000 has already been repaid, the recalculation will take those payments into account, leaving an outstanding balance of no more than €220,000, or €120,000 for farmers.

Banks, investment funds and loan servicing companies will be required to recalculate their existing claims in bulk within six months of the law coming into force.

Borrowers will not need to take any action or initiate any procedure. Regardless of whether the loan remains with the original lending bank, the bank has closed or is in liquidation and the claim has been transferred to a successor bank, the loan has been securitised or the claim has been assigned to a loan and credit servicing company, creditors will be required to recalculate every claim covered by the new framework without an application from the borrower. They must then record the resulting balance in their accounting and information systems.

Payments made by borrowers, guarantors or third parties will be taken into account, but the proposed legislation does not provide for the refund of amounts already paid.

The changes will also have an immediate impact on borrowers facing enforcement proceedings. Foreclosure or seizure will be allowed to proceed only for the amount established after recalculation. In other words, enforcement cannot be based on an inflated claim that exceeds three times the original loan amount or, where applicable, twice that amount.

For foreclosures already pending, the creditor or claim servicer will be required to notify the relevant parties of the revised amount and adjust all enforcement measures accordingly. Even if a foreclosure sale goes ahead, the borrower’s losses will be limited: any proceeds exceeding the creditors’ reduced claims will be returned to the borrower.

Pressure for faster, more sustainable debt restructuring

The rules governing bilateral loan restructuring negotiations conducted by loan servicers will also change.

The draft legislation introduces binding deadlines. Creditors must respond to a restructuring request within three months, and negotiations must be completed within six months. Failure to meet the deadline will automatically be recorded as a breach, the Bank of Greece will be notified, and the accrual and capitalisation of interest will be suspended until a response is provided.

As Ms Alampasi told AMNA, “The new rules establish a specific timeframe for bilateral negotiations, cap upfront payments at 15% and require documented proposals tailored to the borrower’s actual financial and asset position. They also protect borrowers who meet their obligations: as long as they comply with their restructuring agreement, they cannot face enforcement measures. And before a foreclosure takes place, the creditor must first have submitted a genuine, properly documented restructuring proposal.”

The proposed measures include the following:

• A restructuring proposal three months before foreclosure: Creditors will be required to submit an appropriate, sustainable and fully documented restructuring proposal at least three months before a foreclosure sale.
• An upfront payment capped at 15%: The upfront payment required for a direct bilateral restructuring agreement will be limited to 15% of the debt, compared with practices that, according to the government, could require as much as 50%. The measure is expected to make agreements easier to conclude, particularly for borrowers with limited liquidity. A lower percentage may be permitted where financial hardship, social criteria or health problems are documented.
• Protection for borrowers who comply with their agreements: Claim servicers will be prohibited from terminating the agreement, taking enforcement measures or proceeding with foreclosures while the borrower is complying with an active restructuring arrangement. Any action taken in breach of this rule will be invalid. The borrower will be credited with an amount equivalent to five monthly instalments, and the agreement will be extended by an equivalent period. Fines could reach €500,000 per borrower.
• Binding deadlines for responses: When a borrower submits a complete application, the creditor must respond within three months with a sustainable, documented proposal or a reasoned rejection. The borrower will have one month to reply, and the process must be completed within six months at the latest, including for debts already subject to enforcement proceedings.
• Documented proposals and penalties for delays: Servicers’ proposals must set out the income and asset information on which they are based and, where feasible, include two alternative solutions. If the creditor misses the three-month deadline, a breach will automatically be recorded, the Bank of Greece will be notified, and the accrual and capitalisation of interest will be suspended until a response is provided.

In all cases, borrowers will be entitled to request a detailed statement of their debt free of charge. This must include the loan agreements and any amendments, payment history, interest-rate calculations, principal, interest, commissions and all other charges.

The information must be provided within 45 days. If the deadline is missed, the accrual of interest will be suspended until the borrower receives a complete response.

For loan and credit servicing companies, the draft legislation also provides for the annual publication of financial information, portfolio details, servicing results and information on complaint handling. They will also be required to submit a strategic plan containing recovery forecasts and performance indicators.

These measures are due to begin taking effect in early 2027, three months after the new law is passed. The final form of the framework will depend on the outcome of the public consultation and the subsequent legislative review before the bill is put to a vote in Parliament.