The Loan Servicers and Credit Purchasers Act (the “Act”) was finally enacted in early June 2025. It transposes the requirements of the European legislation aiming to limit non-performing loans (“NPLs”), prevent their future accumulation and enhance consumer protection.

The Act introduces two key concepts into national law – “loan servicer” and “credit purchaser” - marking the beginning of long-anticipated regulation in the debt collection sector.

“Loan servicer” is defined as a joint-stock company that holds a license and performs receivables servicing activities on behalf of a credit purchaser for an NPL. These activities include:

1. collecting or recovering payments due under a credit agreement from borrowers;

2. renegotiating the terms of the credit agreement;

3. administering complaints from borrowers;

4. notifying debtors of changes in interest, fees and other amounts due.

Loan servicers are subject to licensing by the Bulgarian National Bank (“BNB”) and are entered in a special public register. They are required to meet rigorous criteria related to minimum capital, professional management, transparent structure and professional insurance. This is a clear signal to the market – debt collection activity is no longer a “grey zone”.

“Credit purchaser”, by contrast, is any natural or legal person who is not a credit institution but acquires receivables under bank NPLs in the course of their professional or business activity. The Act also imposes specific requirements and rules of conduct on these market players as well.

Strong safeguards for the fair treatment of borrowers are envisaged in the Act. Whether a collector or a credit purchaser, several requirements should be respected, namely:

·         Providing clear, understandable and fair information to borrowers without misleading them;

·         Respect for privacy - telephone calls are prohibited between 20:00 and 7:00 and on weekends and holidays;

·         Prohibition of pressure through third parties - no contact may be made in connection with or in respect of the debt with persons against whom it has not been assigned;

·         Prohibition of public disclosure of facts - notices and information about the consumer's debt may not be posted in any form in public places.

Obliged entities are also required to apply ethical standards in their communications with borrowers and to refrain from aggressive and deceptive commercial practices. Prior to the first collection action, the borrower is entitled to a free-of-charge notice containing detailed information about the transfer of the loan, the amount of the debt and other material circumstances relating to the credit.

The loan servicer receives and holds funds from borrowers in a dedicated bank account separate from its own funds and assets. These amounts are immune from seizure or inclusion in bankruptcy proceedings - a significant guarantee that borrower payments will reach the rightful creditor.

Regulatory oversight of the activities of loan servicers and credit purchasers is shared between the BNB (handling registration, licensing and financial supervision) and the Consumer Protection Commission (ensuring compliance with ethical standards and rules in communication, preservation of consumer rights). Supervision and monitoring also include on-site inspections and administrative liability in case of violations.

The scope of the Act currently applies only to bank loans and does not include the servicing of so-called “fast loans”. The new piece of legislation  is an important step towards ensuring predictability and public confidence in this sector, a more transparent and regulated environment, as well as safeguarding consumer rights.

The Act enters into force upon its promulgation in the State Gazette and from that moment loan servicers and credit purchasers have a six-month period to bring their activities in line with the new requirements. A major restructuring of the sector is expected that will also require appropriate legal assistance.