One in five could pay off bad loans

Many borrowers claim they can’t service their debts but take advantage of measures to help truly needy By Alekos Lidorikis

The majority of citizens with debts that are not being serviced have genuine difficulties in repaying them, and it is they who will benefit from the solution being sought to relieve them from that burden. However around 20 percent of debtors are “strategic defaulters,” taking advantage of the economic crisis so as not to pay their dues, a senior bank official told Kathimerini.

In housing credit, estimates by bank officials converge on the view that about 15-20 percent of nonperforming loans, or 4 to 5 billion euros out of a total 25 billion, could be serviced.

“About one in every six who have taken out a mortgage loan and claim they are unable to make their payments could service them properly,” the same senior official said.

In consumer credit, out of a total 10 billion euros of bad loans, estimates say debtors could in fact service loans worth between 2 and 2.5 billion euros – i.e. some 20 to 25 percent.

These so-called strategic defaulters are borrowers who have taken out mortgage or consumer loans and can afford to repay them but are taking advantage of the consequences of the economic crisis and benefiting from bank payment plans or legislation drafted for those in real need of support. They declare that they are unable to service their debts so as to cut their installments down to a minimum level, concealing their actual incomes and property assets.

Senior credit sector officials agree that about one in every three borrowers who have resorted to the protection offered by a 2010 law (named after the economy minister who introduced it, Louka Katseli) do not fulfill the criteria laid out in that regulation. Applicants for protection from creditors number 150,000 for debts adding up to 12 billion euros.

Bank officials add that when the lenders informed borrowers about the consequences of coming under the protection of the Katseli law, some 30 percent of the applicants said they would withdraw their application and instead try to enter a payment plan. That was because many of those borrowers had not realized that the provisions of the Katseli law call for the applicant to declare bankruptcy, which would put them under monitoring for the rest of their lives.