site.btaParliament Adopts Conclusively Credit Servicers and Credit Purchasers Act

Parliament on Thursday adopted conclusively a Credit Servicers and Credit Purchasers Act. This law aims to promote the development of a secondary market for non-performing loans granted by credit institutions, with safeguards in place to ensure the protection of borrowers' rights.

It introduces into Bulgarian legislation the requirements of a European directive, after on March 26 the European Commission petitioned the Court of Justice of the European Union for failure to comply.

The act introduces a licensing regime for persons involved with servicing claims on non-performing loans granted by credit institutions. It regulates the requirements for credit purchasers and the obligations of credit institutions operating in Bulgaria in relation to the transfer of NPLs, as well as the notification obligations where credit institutions are designated by a credit purchaser to carry out NPL servicing activities. This law shall apply only to non-performing loans granted by credit institutions established in the European Union.

The Bulgarian National Bank has been designated as the competent authority for the activities of persons under this law, except for activities related to consumer protection, for which the Commission for Consumer Protection is the competent authority.

With regard to borrowers, in order to strengthen their rights, there is a requirement to treat them fairly; to notify them of the transfer of a non-performing loan; and a prohibition on claiming a claim other than that specified in the contract between the borrower and the original creditor.

Proposed changes to the Private Enforcement Agents Act, which allowed private enforcement agents to service claims on non-performing loans granted by credit institutions, were dropped from the Bill.

The law on loan servicers and loan buyers will come into force on the day of its promulgation.