site.btaRegulator Clamps Down on Banks over Consumer Rights Violations

The Commission for Consumer Protection (CCP) on Wednesday urged all banks in Bulgaria to review their consumer loan agreements within 14 days and remove clauses that violate consumer rights. The CCP said in a press release it is ready to initiate class action lawsuits against those banks which refuse to carry out its recommendations.

The regulator has checked the consumer loan agreements of all banks active in Bulgaria. The checks revealed unfair clauses in all agreements and a range of unfair commercial practices. These include collection of non-transparent charges and commission fees, the inclusion of unlawful charges and fees related to the absorption and the management of loans, and charges that are not clearly defined in the agreements.

Another unfair practice is the limitation of the customer's right to decline service. To exercise their right to decline service, customers are required to follow specific procedures which are unilaterally imposed by the banks and do not conform to the law. Yet another malpractice has to do with pledge requirements. It involves clauses giving the lender access to private property (property viewing and visiting) or the right to impose limitations on the customer's assets even in case of insignificant or disputable liabilities.

The rule to notify the customer is also breached: a consumer loan agreement does not require the bank to provide clear prior information about changes it makes to provisions in the agreement, including updates of reference interest rates.

The CCP has detected unfair acceleration clauses making it possible to unilaterally declare a loan as recoverable ahead of schedule in the event of insignificant violations of the agreement, including such that do not jeopardize the lender's interests.

The watchdog has found limitations on online communication, with consumers being unnecessarily required to communicate with their bank mainly in hard copy.

Orders have been issued with an aim to halt banks' violations of consumer rights. Offenders face pecuniary penalties for each violation, the CCP said. It called on all affected individuals to report violations and to visit the CCP's website or regional offices for information and assistance.