Payday loans: ruling party wants to cap costs at 20 percent a month
Progressive Bulgaria plans stricter rules for small loans: a cost cap, a night-time contact ban for debt collectors and a register for people who do not want to be lent money.
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The ruling Progressive Bulgaria party wants to tighten the rules on payday loans. Under its proposed amendments to the Consumer Credit Act, all costs – interest and every fee – on small loans of up to two minimum wages could not exceed 20 percent a month. Budget committee chairman Konstantin Prodanov gave an example: according to industry analyses, a borrower taking 1,000 euros can today end up repaying 2,000 euros within one or two months, whereas in future the maximum charge would be 200 euros.
Debt collectors would no longer be allowed to contact debtors between 8 pm and 8 am. A register is also planned in which people can voluntarily enrol if they do not want to be granted loans, and lenders would get access to the register of people with gambling addiction. Loans to minors would be banned without a parental declaration.
The Consumer Protection Commission and the Bulgarian National Bank would cooperate more closely on systemic violations. Prodanov stressed that there is demand for such loans. Under the proposal, they would fall under the small-loan rules.