According to the provisions of The Sale of Credit Facilities and Related Matters Laws of 2015 to 2022 (Ν.169(Ι)/2015, Ν.86(Ι)/2018 and Ν.129(Ι)/2022), (the “Law”), any legal person intending to assume the activity of the acquisition of credit facilities in the Republic of Cyprus, or assume the servicing of a portfolio of credit facilities in the Republic of Cyprus, is obliged to obtain the prior approval of the Central Bank of Cyprus (“CBC”). It is hereby clarified that according to the provisions of sections 3-(2)(a) and (b) of the Law, the following credit facilities are excluded from the Law’s scope: (a) credit facilities governed by the legislation of other member states or third countries, (b) credit facilities which are transferred according to the provisions of The Securitisation Law or The Law for the Transfer of Banking Business and Collateral.
Αccording to the provisions of the Law, the following legal persons are permitted to engage in the activity of acquiring credit facilities without obtaining the prior approval of the CBC: (a) credit institutions authorised by the CBC; (b) credit institutions that are authorised and supervised by the competent authority of another member state that have the right to provide services or to establish a branch in the Republic of Cyprus; (c) financial institutions, which are subsidiaries of credit institutions incorporated in a member state that has the right to provide services or to establish a branch in the Republic of Cyprus.
CBC grants a licence for acquiring credit facilities only to legal persons that have been incorporated in the Republic of Cyprus, provided that it is satisfied, inter-alia, that: these legal persons are in a position to fully comply with the provisions of the Law; they are able to maintain at all times a minimum paid up share capital of €100.000; their shareholders and directors meet the criteria of fitness and probity; they have an organisational structure that enables them to provide services in accordance with the provisions of the Law; and their planned operations do not raise any concerns that the financial stability of the Republic of Cyprus will be negatively affected.
Authorisation for the operation of a Credit Servicer, will only be granted to legal persons incorporated in the Republic of Cyprus, provided that the CBC is satisfied inter-alia, that: these legal persons are in a position to fully comply with the provisions of the Law; their shareholders and directors meet the criteria of fitness and probity; they have an organisational structure that enables them to provide services in accordance with the provisions of the Law; they have an appropriate internal governance policy and internal control mechanisms that ensure that the rights of the borrowers are respected and treated fairly.
A legal person that intends to establish a Credit Acquiring Company (“CAC”) or operate as a Credit Servicer in the Republic of Cyprus, may submit to the CBC an application with the accompanying documents specified in sections 5 and 4(A) of the Law, respectively, and in paragraph 5 of The Authorisation and Supervision of Credit Acquiring Companies and Credit Servicers Directives of 2020 and 2022. The CBC also issued The Governance and Management Arrangements of Credit Acquiring Companies and Credit Servicers Directives of 2020 and 2022, which should be read together with The Authorisation and Supervision of Credit Acquiring Companies and Credit Servicers Directives of 2020 and 2022. The Directives were issued by the CBC under the powers vested in it by the provisions of the Law in order to regulate, inter alia, the procedures for granting authorisation to operate as a CAC or a Credit Servicer and the internal organisation and governance of the CAC and Credit Servicers and the outsourcing of operational functions to third parties.
Legal persons interested in obtaining an authorisation to operate a CAC or operate as a Credit Servicer must complete form No. CAC/Q1 titled “Application for the granting of authorisation as a Credit Acquiring Company under Section 5(1) or as a Credit Servicer Under Section 4A(1) of the Sale of Credit Facilities and Other Related Issues Laws of 2015 to 2022” and submit it to the CBC.
As for legal persons seeking to acquire directly or indirectly a “qualifying holding” in a CAC or a Credit Servicer as defined in Section 2 of the Law, must complete form No. CAC/Q2, titled “Questionnaire for Direct and Indirect Corporate Shareholders in a Credit Acquiring Company or a Credit Servicer” and submit it to the CBC.
Legal persons seeking to acquire directly or indirectly a non-qualifying holding in a CAC or a Credit Servicer should complete form No. CAC/Q2, mentioned above, and, submit it to the CBC, only in case they are amongst the 20 largest shareholders or have obtained a holding of 5% or more.
Natural persons seeking to acquire directly or indirectly a “qualifying holding” in a CAC or a Credit Servicer must complete form No. CAC/Q3, titled “Questionnaire for Direct and Indirect Shareholders (Natural Persons) and submit it to the CBC.
Natural persons seeking to acquire directly or indirectly a non-qualifying holding in a CAC or a Credit Servicer, should complete form No. CAC/Q3, mentioned above, and, submit it to the CBC only in case they are amongst the 20 largest shareholders or have obtained a holding of 5% or more.
Additionally, the CBC has issued The Assessment of Suitability of Members of the Management Body and Key Function Holders of Credit Acquiring Companies and Credit Servicers Directives of 2020 and 2022 in order to regulate, inter alia, the criteria for the fitness and probity of members of the management body and key function holders. In accordance with Part IV, every candidate must complete the questionnaire titled “Personal Questionnaire for the assessment of Suitability of the Members of the Management Body and Key Function Holders of Credit Acquiring Companies or Credit Servicers” (CAC/Q4).
Applications and relevant documentation should be submitted via the CBC’s e-platform. It is noted that the relevant applications must include a receipt of the payment of the relevant application fee which should be deposited in the account - "APPLICATION FEES" with IBAN CY65 0010 0001 0000 0000 0772 3042. For further details and relevant instructions please send an email request to licensingsection@centralbank.cy
Prior to the submission of an application, prospective applicants are advised to refer to the below list of common errors observed in applications in order for these to be avoided:
Applications for the authorisation of Credit Acquiring Companies - common errors observed
Finally, it must be noted that the CBC, acting under the authority vested in it under Section 17 of the Law, has issued The Notification of Borrowers and Guarantors Directive of 2016. The purpose of this Directive is to set out the procedure that relates to the notification of borrowers and/or guarantors, as provided in the Law, by a credit or a financial institution of its intention to proceed with the sale of credit facilities.
Moreover, CBC acting under the authority vested in it under Article 16 of the Law has issued the Directive for the Setting and Payment of Fees relating to the carrying out of the Central Bank’s supervisory functions regarding Credit Acquiring Companies and Credit Servicers. The purpose of this Directive is to set out the procedure that relates to the determination of the supervisory fees that are to be paid by CACs and Credit Servicers on an annual basis to the CBC.