CONSUMER LENDING CHANGES HIDE RISKS

Bankers fear new customers' rights may encourage misuse

The new Consumer Credit Act (CCA) may lead to misuse by customers, bankers told the Pari daily. According to them, the rights given to clients by the amendments may hinder the work of the banks.

Perils

One of the biggest dangers is the higher cost of loans. That may happen if a lot of borrowers decide to repay their loans ahead of schedule, UniCredit Bulbank's CEO Levon Hampartsumyan commented. MKB Unionbank's CEO Maria Ilieva also voiced the opinion that the changes may encourage misuse of various kinds.

Differences

The amendments clashed the opinions of members of parliament and bankers. The main disagreement concerns loan interest rates and contracts. According to the parliamentary economy committee, lenders unilaterally raise the interest, even when there are no grounds for such a move, and often do not inform borrowers about the change.

Bankers

Bankers countered, saying that the annual interest rate on loans is clearly specified in each and every contract. According to them the new requirement for using one and the same font throughout loan ads is good. As a whole, the legal changes will have a positive effect on the sector, as there are banks with misleading advertisements, financiers said. Apart from better consumer protection, the new act allows clients to get more information and expands the financial services offered.

Changes

Amendments increase borrowers' rights
The consumer loan ceiling is BGN 147,000, compared with BGN 40,000 before.
Borrowers can repay their loans ahead of schedule without penalty fees.
Customers can terminate their contracts within 14 days of singing and restore the amount within 30 days.
Banks are obliged to inform their clients of any change concerning interest rates.
All reasons for a possible increase in the interest rate should be clearly specified in the contract.