Law 3869, known as the “Katseli Law” after the former minister who introduced it, has evolved into a clause that is being used to protect strategic defaulters, offering shelter to tens of thousands of devious debtors.
Bank officials estimate that almost one in three debtors (from a total of 150,000 applications) who have sought protection according to the law’s provisions are people who could have paid off their dues but choose to use various methods, including loopholes in the law, to avoid doing so.
A remarkable 20,000 borrowers have filed applications for protection of their assets from confiscation and then withdrawn their application, typically just before it was due to be examined. This trick allows bad debtors to buy time before their case is returned to the bank for it to resume the process for the settlement of the arrears. Often strategic defaulters will then file a second application, before withdrawing it again.
Legal sources acknowledge the gap in the law allowing debtors to apply once, twice or even three times without any consequences, given that there is no preliminary screening of applications.