New Moroccan Bill Streamlines Debt Recovery Process for Banks and Borrowers

Banks and their clients now have three mechanisms to negotiate the judicial recourse in the recovery of unpaid debts, through the transfer of pledged assets between the contracting parties, by agreement.

The arbitration pact, the power of attorney clause and the judicial attribution are the new mechanisms made available to creditors and debtors, although the first is the most flexible.

In the event of non-payment of the loan, the arbitration pact allows the creditor (the bank) to appropriate the guaranteed asset under certain conditions. Subject to a formal notice summoning the debtor to pay within a fortnight, this formula, although difficult for the bank to manage, will take place without judicial procedures, and will make it possible to stop the actual price of the property by the two parties or, failing that, by an expert appointed by the judge. The difference will be paid by the creditor, if the value is higher than the debt.

The power of attorney (non-judicial sale) allows the sale of the pledged property by mutual agreement or public auction, according to a price agreed between the parties or set by an expert. Judicial attribution, on the other hand, is only required when the arbitration pact is not included in the constitutive act. It gives the creditor the right to request the transfer of the property in his name, based on a price set by the expert.

Creditors and debtors now have alternatives that did not exist under the old regime, which allow them to avoid going to court, within the framework of security interests.