Before briefly examining the content of the decision, we should analyse the relevant law on securitisation mentioned by the Supreme Court and the guidelines of the Supervisory Authority and case law on the activity of the so-called Sub-Servicer who, in the context of securitisation transactions, is responsible for the recovery of receivables on behalf of the Master Servicer. As is well known, this activity is also usually carried out by debt recovery companies that are not supervised by the Bank of Italy and hold a licence for out-of-court credit recovery under Article 115 of the Consolidated Law on Public Security.
We should start from the provisions of Article 2(6) of Law No 130/1999, which reads as follows: “The services mentioned in paragraph 3(c)” (i.e. the collection of assigned receivables and the provision of cash and payment services) “may be provided by banks or financial intermediaries entered in the register under Article 106 of Legislative Decree No. 385 of 1 September 1993. Other entities wishing to provide the services mentioned in paragraph 3(c) … shall apply … for registration in the register under Article 106 of Legislative Decree No. 385 of 1 September 1993, even if they do not carry out the activities mentioned in paragraph 1 of the same article, provided that they meet the relevant requirements”. This provision therefore recognises that the activity of “collection of assigned receivables and cash and payment services” should be considered as “reserved” only to to supervised entities.
In this respect, it should be noted that:
- the Bank of Italy, under Title III, Chapter 1, Section VII, paragraph 5.1 of Circular 288/2015, explicitly allows the outsourcing of activities related to the collection of assigned receivables and to cash and payment services, on condition that “the outsourcing contract expressly provides that the servicer is authorised to carry out periodic checks on the assigned parties to verify the accuracy of their reports, identify any operational deficiencies or fraud and assess the quality and effectiveness of the collection procedures”;
- with regard to the possibility of sub-delegating specific credit recovery activities, the Bank of Italy, in its Notice of 11 November 2021, considered that “practices characterised by a clear distinction between the so-called ‘master servicer’, a supervised entity responsible only for guarantees, which cannot be delegated, provided for by Law No. 130/1999, and the ‘special servicer’”, holder of the licence provided for by Article 115 of the Consolidated Law on Public Security , are lawful.
Therefore, in conclusion, the Servicer may legitimately delegate to third parties tasks of an operational nature, provided that the supervisory role remain its responsibility.
(Continued) … and the guidelines of the Supreme Court Case Law.
In line with the above, the Supreme Court case law has expressly deemed the sub-delegation of credit recovery activities to an entity holding a licence under Article 115 as legitimate. Specifically, it has been noted that in securitisation transactions, “the task of recovering debts is first entrusted to a master servicer (which is a financial intermediary under Article 106 of the Consolidated Banking Act or a bank) and only at a later stage subcontracted to the special servicer [...]. As a matter of fact, the financial intermediary (or credit institution) is already subject to supervision and the master servicer is therefore an authorised entity, while the special servicer, licensed under Article 115 of the Consolidated Law on Public Security, is considered a mere provider of credit management services”1.
Supporting this interpretation, the Court of Monza's ruling of 22 January 2024 states that “Article 2(6) of Law 130/1999 is a mandatory provision of law that “reserves” the debt collection services entrusted to the special purpose vehicles exclusively for entities listed in the financial intermediaries register under Article 106 of the Consolidated Banking Act (without prejudice to the possibility of subdelegating collection activities to sub-servicers who may not be registered in the said register but operate under the servicer’s responsibility)”2. Finally, the Court of Busto Arsizio’s judgment of 16 February 2024 clarified that “in the event of credit recovery activities delegated to a sub-servicer, the fact that the sub-servicer is not listed in the register mentioned by Article 106 of the Consolidated Banking Act does not invalidate the delegated party’s capacity to act”.
However, it is important to note that a portion of the first instance courts case-law has taken a different stance, holding that “for securitised receivables, the credit recovery activity can and must be carried out solely by a supervised entity, namely an entity entered in the register under Article 106 of the Consolidated Banking Act. Consequently, while non-registered entities are not authorized to carry out such recovery activity and any outsourcing (even if formally established) shall certainly be null and void." (...)”3. This decision on the one hand emphasizes a strictly literal reading of the regulatory text and on the other hand disregards the previous stance expressed by the supervisory authority regarding outsourcing. A similar conclusion appears to have been reached by the Court of Treviso, which stated that “sub-delegated companies or special servicers, not listed in the register under Article 106 of the Consolidated Banking Act but authorized solely under Article 115 of the Consolidated Law on Public Security , are not entitled to collect securitised receivables”4. However, the aforementioned Court clarified that this principle does not contradict the provisions of the Ministry of Economy and Finance's Decree of 2 April 2015, no. 53, “Regulation containing rules on financial intermediaries for the implementation of Articles 106, c.3, 112, c.3 and 114 of Legislative Decree no. 385 of 1.9.1993". Article 2(2) of this Decree pertains to "out-of-court debt collection," a distinct activity from the "collection of assigned receivables” mentioned in Article 2(3) and (6) of Law no. 130 of 30 April 1999.
The Supreme Court Order No. 7243 of 18 March 2024.
In this order, the Supreme Court ruled on the consequences of failure by parties entrusted with collecting securitised receivables to register in accordance with Article 106 of the Consolidated Banking Act and provided significant clarifications, particularly regarding the public interest aspects of the provisions at hand, considering the specific regulation (and assessment) by the competent supervisory authority.
In particular, the signatory claimed that, according to the combined provisions of Article 2(6) of Law no. 130 of 30 April 1999 and Article 106 of the Consolidated Banking Act - whereby, as mentioned above, the collection of receivables assigned as part of securitisation transactions is directly reserved to banks or financial intermediaries listed in the register of financial intermediaries -, any assignment of debt collection tasks (including compulsory collection) to parties other than those mentioned shall be null and void and the invalidity of the outsourcing affects the actions taken in exercising the activity.
However, the Supreme Court dismissed this objection as spurious and groundless.
The petitioner's argument, which the Supreme Court did not accept, is that the above-mentioned provisions are mandatory rules because they protect public interests, and therefore any transactions (assignment, outsourcing, etc.) between the parties involved and any collection actions carried out in breach thereof shall be null and void under civil law.
In this regard, the Supreme Court stated that, with respect to the interest protected, all legal provisions, due to their general and abstract nature, have elements of public interest, but this is not sufficient to qualify them as mandatory, since there must always be "overriding general interests of the community" or "fundamental legal values".
The mere fact that the (national and general) economic significance of banking and financial activities is mentioned is not sufficient to qualify as mandatory the entire indefinite array of provisions of so-called "economic law" set out in entire Acts (such as the Consolidated Banking Act or the Consolidated Financial Act)
Moreover, the Court believes that Article 2, paragraph 6, of Law No. 130 of 30 April 1999 and Article 106 of the Consolidated Banking Act do not have any relevance under civil law, but are related to the (administrative) regulation of the banking sector (and more generally of financial activities), the public relevance of which is specifically protected by the system of controls and powers (including sanctions) vested in the supervisory authority (i.e. the Bank of Italy) and also protected by criminal law.
Therefore, there is no valid reason why the consequences of the operators' non-compliant behaviour should affect the contractual relationship (or even the collection activities carried out) and thus cause the annulment of agreements (assignments of receivables, mandates, etc.) or of procedural acts for the implementation of credit protection, as part of ordinary or even interim proceedings (injunctions, seizures, interventions, etc.), allegedly flawed by "derivative" invalidity.
In conclusion, the Supreme Court, also referring to the arguments and rulings of a previous judgment of the Joint Divisions5, held that, even if the entity actually in charge of the collection of receivables is not entered in the register under Article 106 of the Consolidated Banking Act , this does not give rise to any invalidity, even if such failure may be relevant at another level of the relationship with the supervisory authority or for possible criminal law issues (Title VIII, Chapter I of the Consolidated Banking Act).
Moreover, the reasoning of the judges of the Supreme Court seems to be fully in line with the guidelines issued by the supervisory authority on the matter and with the resulting market practice that has developed over the last decade. In particular, reference is made to the Servicer's decision to delegate certain functions to the Sub-Servicer, within the limits set by the Bank of Italy and mentioned above.
Authored by Annalisa Dentoni-Litta and Sabrina Setini.
References
1 See Court of Florence, 6 July 2023, no. 2094, in www.dirittodelrisparmio.it; in line therewith, see Court of Messina, 21 December 2023, no. 2478, in www.ildirittodelrisparmio.it; Court of Bergamo, judgement no. 1081 of 10 November 2023.
2 See, furthermore, Court of Monza, Property Enforcement Division, 19 February 2024
3 Court of Viterbo, order of 27 May 2023.
4 Court of Treviso [decision] of 18 December 2023.
5 See Supreme Court, Joint Division, 16.11.2022, n. 33719, in www.dejure.it.
