Progressive Bulgaria (PB) will propose lower extra fees on quick loans and tougher checks on lenders in the new consumer credit law, the party's Konstantin Prodanov told a briefing in parliament. The proposals will come after the first reading of the bill and before the second. See our original report: "Progressive Bulgaria" introduces a bill against abuse of payday loans.
This follows our 10 September report on the PB bill against abuse in quick loans. At that time Zdravko Markov said the loopholes in the law must be closed with higher capital requirements for firms and a full ban on the franchise model.
The current cap stays, but the way the cost of a loan builds up over its periods will change. On loans of up to two minimum monthly wages, total costs in the first month will not exceed 20% of the sum lent. In later periods the cap will rise step by step until it reaches the current limit of five times the legal interest rate. A €1,000 loan will cost at most €200 extra in the first month.
Prodanov said the aim is to close the loopholes that let lenders get round the caps by charging various fees.
Firms will have to check whether every applicant can really repay. A contract signed with no check, or only a formal one, will be void, and the borrower will repay only the principal, with no interest or penalty charges. The Consumer Protection Commission (KZP) will have to make sure the rule is followed. "Of course, they cannot inspect every single contract of every single lender, but that happens first on a complaint," Prodanov said. He added that there will also be a check when a borrower in difficulty goes to court to seek their rights and it turns out no assessment was made.
The courts will send the KZP all final rulings on void contracts and clauses, unfair terms and unfair practices. The commission will keep a public register of unfair clauses and use it in later checks. If a company breaks the rules repeatedly, meaning three or more times, the KZP will notify the Bulgarian National Bank (BNB) and ask for the company to be struck off the register of financial institutions.
The law will state clearly when a loan can fall due early, and that interest on late payments cannot be higher than the legal interest rate on overdue debts.
PB also proposes to ban the franchise model for quick-loan firms, to curb informal operators who lend or act as brokers without effective oversight. People convicted of intentional general crimes will not be able to hold posts in companies that issue, process or collect such loans. Debt collectors will not be allowed to contact borrowers between 8pm and 8am.
A new loan will not be allowed within 24 hours of a loss from gambling. Firms will get access to the register of gambling-vulnerable people kept by the National Revenue Agency (NRA). Stefan Belchev (PB), chair of the economic policy, investment and industry committee, said a listing will not mean an automatic refusal, but will be an added risk factor when a firm assesses whether a person can repay.
Non-bank financial institutions will lose access to sensitive personal data through the RegiX system. Citizens will submit their own income data through a free NRA online service, using an electronic signature or a personal identification code.
PB's Zdravko Markov said the party is in a hard fight, but quick-loan firms will no longer "fleece" Bulgarians.
At the briefing, Prodanov also commented on a complaint by GERB to the European Commission about the extraordinary audit of the Road Infrastructure Agency, which parliament ordered the Court of Audit to carry out. He said the audit results should be awaited, and then it will become clear "who is to blame and who is right".
Follow-up: Non-bank lenders: changes to the loan law may help loan sharks