The widespread practice of selling non-performing credit portfolios, or Non-Performing Loans (NPL), by Portuguese banks was the response found to the 2008 financial crisis and the subsequent European sovereign debt crisis. Pressured by the European Central Bank (ECB) and the Bank of Portugal (BdP) to reduce their levels of toxic assets, which threatened the system’s solvency, national financial institutions found the mass sale of these portfolios to be the most efficient mechanism to “clean up their balance sheets”. From a macroeconomic point of view, the strategy was framed as a success story. Portugal was even singled out as a “case study” in managing the bad debt crisis, having managed to reduce the system’s NPL ratio from a peak of almost 18% in 2016 to values around 2.4% at the end of 2024. However, behind this apparent success, hides a reality, for many, perverse. The need to resolve a systemic crisis gave rise to a set of players habitual speculative activities and a highly profitable business, built on the financial difficulties of families and companies. The volume of transactions in this market has reached impressive proportions. In peak years, between 2018 and 2019, annual operations generated between 7 and 8 billion euros. After a decline in 2020 due to the pandemic, the market has recovered its strength and continues to be exceptionally active. What began as an emergency sanitation measure turned into a speculative and highly profitable business. This market is dominated by a well-defined set of players. On one side, as sellers, are the main Portuguese banking institutions, and, on the other side, as buyers, a restricted group of international investment funds and asset managers, which often operate through servicing companies established in Portugal. The opaque structure of many of the buyers, and sometimes their headquarters in offshore tax jurisdictions, heightens concerns about a lack of transparency and tax optimization. For debtors with a home loan, the sale of their loan means the cancellation of the “right of resumption”, that is, the possibility of regularizing outstanding installments and resuming the contract, even after it has been terminated by the bank. This right, enshrined in Decree-Law no. 74-A/2017, was no longer applicable because the new creditor is not a credit institution qualified to “retake” a loan.32 In practice, the sale of the credit works as a sentence of execution of the debt and, potentially, of the house. Faced with the legislator’s inaction, it was the judiciary that put the first brake on these abuses. In two historic rulings, handed down in 2024 and 2025, the Supreme Court of Justice (STJ) declared sales of mortgage loans to unsupervised entities based in Luxembourg null and void. The STJ’s reasoning was clear: since the acquiring entities were not credit institutions, they were legally incapable of ensuring the consumer’s imperative rights, such as the right to return. Therefore, the assignment of the credit, although apparently legal, had the result of circumventing a mandatory protection rule. The court classified the operation as a “fraud of the law”, an act void because it seeks a result that the law prohibits. With the transposition of Directive (EU) 2021/2167, through Decree-Law No. 103/2025, the BdP now has the power to authorize, register and supervise “credit management” entities that act on behalf of acquiring funds. But it’s not enough. The argument that this is a “free initiative” private business ignores one of its dimensions: the systemic risk of the banking sector guaranteed by taxpayers. When banks were rescued with public funds, it was the taxpayer who bore the cost of asset mismanagement that led to NPL accumulation. However, the profits generated from the “cleaning” of these same assets are entirely privatized by investment funds, often without due fiscal scrutiny. This cycle has created a perverse business, in which risk is socialized and profit is privatized. It’s time to put an end to the negotiations. The documented use of investment vehicles based in jurisdictions such as Luxembourg, as in the cases analyzed by the STJ, fuels suspicion of aggressive tax planning. The strategy of carrying out successive sales of credit portfolios between different entities of the same group, located in different countries, is a known method for transferring profits to low-tax jurisdictions, eroding the tax base in Portugal. Decree-Law No. 103/2025 represents an undeniable advance. However, regulation focuses on managing the consequences of the sale, not on rebalancing the transaction itself. The debtor continues to be a passive spectator in a business that decides its financial future. The new law creates a compliance industry, professionalizing and legitimizing a business model that, in essence, continues to be ethically questionable. The debate stops being about whether it is morally defensible to trade family and corporate debts as a speculative asset, and becomes just about whether the rules are being followed.
It is in this aspect that it is imperative to consider deeper reforms:
1. Right of Preemption for the Debtor: The most transformative proposal would be to grant the debtor the right to acquire their own debt at the same discounted price offered to an investment fund or to indicate who would acquire it.
2. Total Transparency about the Assignment Price: It is crucial that the credit sales price ceases to be a commercial secret. Its disclosure must be mandatory, at least in legal proceedings, exposing its profit margins and allowing the courts to assess the proportionality of collection actions.
3. Limitation of Profit Margins: Imposing a maximum ceiling on the amount that can be recovered by the assignee creditor (for example, the purchase price plus a legally defined margin).
4. Right to Oppose the Sale: The debtor who has taken out a loan from a financial institution must be able to oppose the assignment, which will be ineffective without his consent.
In short, regulation was a necessary but insufficient step. Or do we put an end to this type of speculative operations, which only benefit the buyers; or if the business is strictly regulated.
Lawyer and founding partner of ATMJ – Sociedade de Advogados
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