Non-performing Loans in The Netherlands

In recent years, significant developments have taken place in the Netherlands regarding non-performing loans (NPLs) from recent case-law and as a result of European legislative initiatives. This following article outlines the most important developments.

Background

Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers (the Directive) introduces a harmonised regulatory framework for the transfer and servicing of NPLs within the EU. NPLs are defined as loans granted by European credit institutions where the borrower is more than 90 days in arrears on repayments or is unlikely to meet repayment obligations in full without the enforcement of collateral. In such cases, the borrower is at serious risk of insolvency and the lender faces an increased risk of default.

The series of initiatives by the EU concerning NPLs, such as the Directive, can be traced to the aftermath of the 2008 financial crisis, which saw a sharp rise in borrowers’ inability to repay loans and a corresponding increase in the volume of NPLs on the balance sheets of banks. NPLs require banks to hold additional capital and are more burdensome to manage than performing loans. Limited market interest in purchasing distressed credit portfolios has historically constrained the ability of banks to offload NPLs under favourable conditions.

Since a high volume of NPLs negatively affects capital adequacy and limits the capacity of banks to issue new credit, the Directive aims to foster a European secondary market for NPLs. Its goal is to remove legal and regulatory barriers to NPL transfers while ensuring appropriate safeguards. The framework is limited in scope to banks, consistent with the Directive’s aim of supporting the European banking union, promoting competition, safeguarding financial stability, and facilitating credit access to stimulate job creation and economic growth within the EU. The Directive also contains borrower protection measures, providing that the transfer of a loan to a credit purchaser should not result in the borrower being placed in a worse position.

Current legal framework for Dutch NPLs

Under Dutch law, loans may be transferred via assignment (cessie), contract takeover (contractsoverneming), or a transfer under general title (overgang onder algemene titel), such as through a legal demerger (juridische splitsing). Dutch law does not impose a banking monopoly on the holding of loan receivables. As a result, NPLs may be transferred to non-bank entities, who may subsequently act as creditors under the existing loan agreement.

Dutch courts have considered whether a non-bank assignee of an NPL originally issued by a bank inherits the bank's duty of care toward the borrower. This question arises because an assignment under Dutch law transfers only the receivable, not the full contractual relationship between lender and borrower.

The Dutch Supreme Court has clarified that a bank’s duty of care towards the borrower does not automatically transfer to the assignee. The nature of the assigned claim, however, may be shaped by the original lender’s duty of care. Hence, a non-bank assignee may be required to take the borrower’s legitimate interests into account and, in some circumstances, may owe a comparable independent duty of care. Furthermore, the new creditor is bound by the terms of the assigned claim, and the borrower retains all defences that could have been invoked against the original bank. By contrast, in the case of contract takeover or a transfer under general title, the bank’s duty of care does transfer to the purchaser. In the Netherlands, a practice has developed in which NPL portfolios are demerged into a new legal entity that is subsequently transferred to the purchaser. This qualifies as a transfer under general title, meaning the loan documents, including the duty of care obligations, are transferred to the buyer.

Implementation of the Directive in the Netherlands

To implement the Directive, the Dutch House of Representatives adopted the Implementation Act on Credit Servicers and Credit Purchasers on 24 April 2025 (the NPL Implementation Act). The proposal regarding the NPL Implementation Act is currently under review by the Senate Finance Committee with final adoption expected by the end of May 2025.

The NPL Implementation Act applies to the acquisition of NPLs by credit purchasers through assignment or contract takeover under Dutch law. Other methods of transfer under general title, such as legal demergers, appear to fall outside the scope of the legislation.

1. Credit Purchasers: Banks may sell NPLs to credit purchasers – natural or legal persons that acquire (the rights of a creditor under) NPLs in the course of their business and are not banks. While banks established in the EU may act as credit purchasers, they are excluded from the scope of the implementing legislation.
   
   Non-EU credit purchasers must appoint an EU representative. All credit purchasers are also required to appoint a licensed credit servicer when the borrower is a natural person or a small business. Additional obligations apply, including the fair treatment of borrowers, information disclosure requirements towards borrowers, and reporting duties to the competent supervisory authority, which in the Netherlands is the Authority for the Financial Markets (AFM).
    
2. Credit Servicers: Credit servicers are legal entities that manage and enforce the rights and obligations associated with NPLs on behalf of credit purchasers. Their duties include performing credit servicing activities, such as collecting payments. The Directive, as implemented by the NPL Implementation Act, introduces a licensing regime for credit servicers. To obtain a licence from the AFM, applicants must meet a range of requirements related to integrity, professional competence, risk management, and governance.
    
3. Sellers: Banks selling NPLs to credit purchasers must disclose detailed information about the creditor’s rights and any related collateral prior to the transaction, allowing purchasers to assess the potential for recovery. Standardised disclosure templates, as defined in the Implementing Technical Standards (ITS), must be used for this purpose. Additionally, sellers are required to periodically report data on completed sales to the relevant national supervisory authorities.

While Dutch law, as established by the above case-law, already provides borrower protection when loan receivables are transferred to third parties, requiring those parties to act with the same care as the original lender, the Directive’s primary contribution lies elsewhere. It introduces a harmonised supervisory regime for credit purchasers, credit servicers, and credit servicing providers across the EU. A significant change is the requirement for the licensing of credit servicers, ensuring more robust oversight.

Despite efforts by the Loan Market Association (LMA) to exclude syndicated lending from the legislation, such transactions remain within its scope. Nevertheless, the new rules are expected to result in only minor changes to current practices for purely domestic Dutch NPL transfers, which can be provided for in the loan documentation and secondary trading arrangements. Under certain circumstances, however, a non-bank agent or security agent may be required to obtain a licence as a credit servicer. The additional information disclosure obligations via the standardised disclosure templates also represent a departure from current market practice. The impact may be more significant in transactions involving multiple jurisdictions. The Directive could potentially challenge the scope of existing banking monopoly rules. In addition, the governing law of the relevant contracts or the presence of multiple borrowers may affect whether a loan qualifies as an NPL under the Directive.

For more information on implementation of the Directive in the Netherlands and its impact on a secondary market for NPLs, contact your CMS client partner or these CMS experts.