The leaders of “Progressive Bulgaria“ presented proposals to tighten the rules for payday loan companies. The bill was developed by the Ministry of Economy, Investments and Industry and will be submitted between the first and second readings of the Consumer Credit Act, announced the Chairman of the Budget and Finance Committee Konstantin Prodanov.
One of the main changes is the introduction of a mandatory comprehensive assessment of the creditworthiness of each potential debtor. According to the proposals presented, if the creditor does not carry out the check, the client will have to return only the principal, without the accrued interest. “The debtor will be obliged to return only the principal without the interest“, Prodanov said, quoted by Nova TV.
New register for unfair clauses
It is planned that the courts will send to the Consumer Protection Commission the decisions that have entered into force, which have established nullity or unfair practice under a credit contract. The Consumer Protection Commission will create a register of unfair clauses and will monitor for systemic violations.
A mandatory connection between the Consumer Protection Commission and the Bulgarian National Bank is also proposed. If systemic violations are established, the Commission will notify the BNB and request the deregistration of the violator. Currently, non-bank financial institutions are under a registration regime, not a licensing regime, the government said.
Two overdue installments for early repayment
The new texts will explicitly determine when the loan can become early repayable. The proposal is that this will happen with at least two overdue monthly installments and after a 30-day notice.
It is envisaged that the interest on delay will not exceed the legal interest on overdue loans, which, according to Prodanov, is currently just over 10%. It is also proposed to eliminate separate fees and remuneration for activities that are part of the usual processing of the loan. According to the government, it is through such payments that the current ceiling is circumvented.
Threshold for small loans and ban on the franchise model
The proposal defines a small loan as a loan of up to two minimum wages. For these loans, a lower ceiling scale is planned, which will increase linearly on a daily basis and by the end of the first year will reach five times the legal interest rate.
Zdravko Markov said that over one million Bulgarians use quick loans or similar credit instruments. According to him, the franchise model will be banned, and only licensed companies will be able to provide quick loans. “End of garage operators“, said Markov.
The proposals are to be submitted to parliament between the first and second readings of the Consumer Credit Act. Since it is a draft law, the measures are not yet in force.