In this interview, Souad Bernoussi brings her expertise to bear on the main points of the bill, while taking into account international best practice in this field.

TelQuel: Could you briefly explain what the assignment of bad debts held by banks entails?

Souad Bernoussi: The assignment of bad or non-performing debts is a process whereby a bank transfers its hard-to-recover debts to another entity, often a collection company or a specialized investor. In Morocco, this practice is in the making, notably with a project to create a secondary market for these receivables.

The issue of reforming the legal framework for the transferability of non-performing loans (NPLs) is an important and relatively urgent one, since in times of inflation and economic instability, the stock of NPLs is on an upward trend.

Where do you see the importance or urgency of this reform?

This project is crucial for the Moroccan banking sector, as it offers a structured solution for dealing with the increase in overdue receivables. By creating a secondary market, banks can transfer these receivables to entities capable of managing them more efficiently, freeing up resources to focus on their more productive activities. In addition, this strengthens their overall financial stability by reducing the weight of non-performing loans on bank balance sheets.

So, from a legal point of view, what are the challenges to be met by the bill?

There are four main challenges to which the bill must respond. The first is the importance of debtor notification rules. In other words, if the assignment is to be enforceable against debtors, they must be properly informed. This notification can be complex, especially if there are many debtors, or if they are located in remote areas or areas not served by the post office. The bank or assignee must ensure that each debtor is properly informed of the assignment and understands its implications.

Secondly, it is essential that the initial loan contract contains a clause allowing the assignment of the claim to a third party. If this clause is missing or badly drafted, the assignment could be contested by the debtor, making the assignment process more complex.

The third challenge concerns the transfer of ongoing legal proceedings. When legal proceedings are in progress against a debtor at the time of the assignment of the claim, the assignment does not automatically interrupt the proceedings. The assignee must ask to be substituted for the assignor in the legal proceedings. This involves notifying the court and following the legal procedures for continuing the legal action as a new creditor.

The fourth challenge is no small one. It concerns the transfer of collateral associated with receivables. As part of the transfer of a PNP, collateral such as mortgages, business pledges or vehicle pledges must also be transferred to the transferee. For this, it is crucial to notify the relevant authorities (such as the Registrar of Mortgages or the Automotive Department) so that registers can be updated and these guarantees continue to produce their effects for the benefit of the new creditor.

Does the assignee of a doubtful claim need to have any special qualities?

The assignee must have in-depth expertise, not only in collections, but also in legal compliance. He or she must master the legal obligations in terms of protecting debtors’ personal data, and comply with consumer protection rules. This includes respect for debtors’ rights, transparency of procedures, and the adoption of ethical and legal collection practices.

A good grasp of the legal aspects is essential to ensure compliance with current regulations and guarantee that debtors’ rights are respected. The assignee must also be able to effectively manage notifications and aspects relating to the transfer of warranties and ongoing legal actions.

As a practitioner, can you give us a few examples of best practice from which Morocco could learn?

Absolutely. In France, for example, the assignment of bad debts is governed by a well-developed legal arsenal. Banks can sell their non-performing loans to specialized companies or investors thanks to specific legislation, notably Ordinance No. 2009-112 and the 2019 Pacte Act. These texts not only facilitate the assignment of receivables, but also protect debtors’ rights.

The process in France also places a strong emphasis on transparency and compliance with legal obligations, such as personal data protection and consumer rights. The transfer of warranties and pending legal actions is well supervised, ensuring legal continuity and protection for the parties involved.

Morocco could draw inspiration from any successful experience, in France or elsewhere, in this field to structure its own secondary market for bad debts.

Written in French by Amine Belghazi, edited in English by S.E.