On 20 June 2025, the Law on Credit Servicers and Credit Buyers (Law) was promulgated in the State Gazette, # 50, by which the Republic of Bulgaria fulfilled its obligations to transpose Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on Credit Servicers and Credit Purchasers and amending Directives 2008/48/EC and 2014/17/EU. The Law entered into force on the day of its promulgation.
- Key Aspects of the Law
The Law applies to non-performing loans (NPLs) that are provided by credit institutions established in the EU. Measures are provided to ensure the development and transparency of the secondary market for NPLs, including requirements for persons engaged in credit servicing and credit buyers; additional obligations related to guaranteeing the rights of borrowers; obligations for credit institutions as sellers of NPLs.
Credit servicers are subject to a licensing regime. The main entities that must bring their activities into compliance with the requirements of the Law are:
• persons that activity is related to servicing receivables on NPLs acquired from buyers of loans that were initially granted by credit institutions established in EU Member States (so-called loan servicers);
• persons that within the framework of their commercial, business or professional activity, acquire receivables on NPLs (so-called credit buyers).
Credit purchasers and credit servicers are included in the scope of obligated entities under Art. 4 of the Law on Measures Against Money Laundering (MLLA). This means that the specified entities must establish a clear internal organization and documentary framework, providing for measures related to the implementation of the obligations to counteract money laundering under the MLLA.
In addition, credit purchasers become participants in an information system for customers’ monetary obligations – the Central Credit Register, which is maintained by the Bulgarian National Bank (BNB). As participants in this system, credit purchasers have a number of obligations related to reporting circumstances regarding the indebtedness of borrowers. Credit servicers are also obliged to submit information to the Central Credit Register.
2. Licensing Regime
The Law introduces for the first time the requirement to obtain a license before carrying out the following activities:
• collecting or recovering from the borrower any payments due under the credit agreement;
• renegotiating with the borrower the terms of the credit agreement in accordance with the instructions given by the credit purchaser, where the person servicing the loans is not a credit intermediary;
• registering and handling complaints from borrowers;
• notifying the borrower of any changes in interest rates or fees, as well as of any payments due under the credit agreement.
A license is required if the person carries out the above-mentioned activities on behalf of a credit purchaser. If the person services loans that receivables are held by a credit institution, a license is not required. A person who has obtained a license for servicing loans may also carry out other commercial activities, including activities as a credit purchaser.
Obtaining a license is accompanied by several requirements for entities that want to carry out or continue to carry out activities related to NPLs. The main requirements relate to: the legal organizational form – only joint-stock companies; capital; members of the management and control bodies of the entity servicing loans (good reputation, appropriate education, professional experience, etc.), as well as persons holding qualifying holdings; rules and procedures for managing the activity (clear management structure, rules for internal control, risk management, ensuring the continuity of the activity, etc.); protection of borrowers in activities related to receiving or storing their funds; preparation and auditing of annual financial statements.
Entities that have received a license to carry out activities related to servicing loans are entered in a public register kept by the BNB and shall pay annual fees related to ongoing supervision.
3. Requirements to the Credit Buyers
Credit purchasers are traders other than a credit institution that acquire receivables from NPLs provided by a credit institution. Credit purchasers may independently service loans provided to legal entities, in compliance with the requirements of the Law, with the exception of the provisions of Art. 8 – 15 of the Law (requirements for obtaining a license by a credit servicer). In this case, credit purchasers are not required to obtain a license as a credit servicer.
If the non-performing loans are provided to consumers, the credit purchaser should conclude a contract with a credit institution or a credit servicer in relation to the loan servicing activities or obtain a license to carry out activities as a credit servicer if it plans to independently service consumer loans.
The Law also introduces certain periodic information obligations for credit purchasers, e.g. notifying the BNB about the person who will service a given loan, at the latest before starting the activity and about any changes that have occurred, as well as about non-performing loans transferred to third parties at the end of each six-month period.
4. Obligations related to the Communication with Borrowers
The Law provides that credit servicers and credit purchasers must comply with specific obligations in their relations with borrowers. Some of these obligations are related to fair treatment of borrowers, respecting their rights and interests, and privacy, applying rules of ethical conduct and communication, and not using aggressive and misleading commercial practices.
The Law expands the requirements regarding the form and necessary content of the notification of transfer of receivables sent to a borrower. The notification must contain data regarding the credit purchaser and the credit servicer, information on the processing of personal data, as well as details regarding the transfer of the receivable itself (type, amount, grounds for the receivable, due date of the receivable, repaid installments), etc.
Credit servicers must keep the relevant documentation regarding non-performing loans for at least 5 years from the date of termination of the relevant receivables servicing agreement.
5. Competent Authorities and Supervisory Powers
The state authorities responsible for supervising compliance with the requirements of the Law are the BNB and the Consumer Protection Commission (CPC). The BNB supervises the activities of credit servicers and their external contractors, as well as credit purchasers and their representatives. The CPC supervises the above-mentioned entities with regard to consumer protection. In accordance with their competences, BNB and CPC may impose various coercive administrative measures (e.g. prohibit or restrict the performance of certain activities, revoke a license, etc.) not only on the above-mentioned entities, but also on their employees or members of management positions.
The Law introduces a standard passporting/notification procedure and supervisory cooperation measures regarding credit servicers.
6. Deadlines and Transition Periods
Entities falling within the scope of the Law must bring theiivities into compliance by 20 December 20 2025. Until that date, loan servicers may continue their activities and submit an application for a license if they wish to operate after that date.
Credit purchasers must provide information to the BNB on the acquired, respectively transferred, receivables on NPLs and on the contracts concluded with loan servicers before the expiry of the specified period. Credit institutions are obliged to provide information to the BNB on the transferred receivables on NPLs by 20 December 2025.
