Draft Law on Credit Servicers and Credit Buyers

The Draft Law on Credit Servicers and Loan Buyers is published in the Public Consultation Portal.

 The proposed draft Law on Credit Servicers and Credit Purchasers (ZLOKK) introduces the requirements of Directive (EU) 2021/2167 of the European Parliament and of the Council on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU (Directive (EU) 2021/2167, Directive).

The main provisions of the bill include:

1.    Measures ensuring the development of the secondary market for non-performing loans and the introduction of a licensing legal regime for persons carrying out credit servicing activities in accordance with the requirements of Directive (EU) 2021/2167. A licensing regime is provided for the performance of servicing receivables under non-performing bank loans, and the license is issued by the BNB. Only joint-stock companies can obtain a license for such activity, and there is no obstacle for them to be purchasers of non-performing loans. Commercial activities other than those provided for in the Bill are not allowed to be carried out by these persons.

2.    A legal regime shall be introduced to govern in its entirety the conditions for purchasing receivables under non-performing loans, the rights and obligations of the credit purchaser, and the subsequent relationship between the buyer and the borrower arising from the non-performing claim. A buyer of loans can be both an individual and a legal entity. Buyers are obliged to assign the activities related to servicing the acquired receivables to specialized credit servicers who have the necessary knowledge and skills for the quality, effective, and conscientious performance of the activity. The assignment is done by a written contract.

3.    Measures shall be introduced to protect consumers throughout the process from the acquisition of the receivables under non-performing credit agreements, through the servicing to the termination of the contractual relationship. These are measures related to the fair treatment of borrowers, raising their awareness, and ensuring reliable and effective supervision of compliance with their rights and legitimate interests. In this regard, the bill provides for some additional powers in favor of the Commission for Consumer Protection.

4.    In order to maximize the range of persons who can acquire claims on non-performing loans with amendments to the CIA, the activity of acquiring receivables on loans granted by credit institutions under Art. 2, para. 2, item 12 of the CIA will be excluded from the scope of the registration regime regulated in art. 3a of the same law.

The specific objective to be achieved with the bill is the development and improvement of the secondary market of non-performing loans in Bulgaria as a key element of ensuring a stable banking system, respectively effective financing of the economy and higher economic growth. The introduction of a legal regime for the licensing of persons performing credit servicing activities will fill the gap existing in national legislation in terms of an important range of public relations with a significant socio-economic impact.