Amongst the more significant amendments to the new regime are:
1. The introduction of limit on fees (the so-called “caps”) is being revised
The new directive provides for the Member States to implement measures to effectively prevent abuses and ensure that consumers cannot be charged with excessive annual interests on credits, percentage rates of the expense or total credit costs. Such measure could also be the introduction of a cap on the annual percentage rate of the expenses, which currently exists in our country at legislative level. Within 6 years as of the date of entry into force of the directive, the European Banking Authority will have to publish a report on the implementation and enforcement of these measures in each Member State, including an assessment of the methodologies for setting caps and their effectiveness, and in this respect to also outline the best practices in the establishment of such measures.
2. The methods for assessing consumer creditworthiness are refined
The assessment will have to be made on the basis of relevant and accurate information on the consumer’s income compared to his current expenditure and other financial obligations, as well as those of his household. Such information may include data on (1) the individual’s income, (2) financial assets and liabilities, or (3) other financial obligations, and may not include special categories of data, for example, revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or data on the individual’s health condition.
Envisaged is a new possibility for the consumer to request clarification from the creditor (its employee – a natural person) when the creditworthiness assessment is made by an automated data processing system, and to request a review of his assessment by a natural person (rather than automatically). In cases where the credit application is rejected, creditors will need to explicitly inform the consumer that the assessment was made on the basis of an automated data processing system and remind them of the opportunity to obtain clarification and review made by a natural person.
3. Developments in the consumer’s right of withdrawal
If the consumer has not been notified by the creditor about all of the essential contractual terms and conditions of the credit agreement, then the period for withdrawal is extended to 12 months in addition to the 14 days to which the consumer is entitled under standard contractual terms. The withdrawal period shall start from the day of conclusion of the credit agreement and the borrower must necessarily be notified of this right by the creditor, including as regards to the extended withdrawal period in the event of failure to receive a notification.
4. Supplementing the requirements for advertising consumer credit
The main contractual information should be presented in an accurate and specific manner so that consumers are aware that “borrowing money costs money”, and advertisements which incorrectly emphasize the ease and speed of obtaining credit or falsely imply that credit leads to increased financial resources should be prohibited.
Following the adoption of the new directive, its transposition at national level in Bulgaria is, of course, expected, involving specific legislative amendments.
