Bulgaria to strictly regulate payday loans instead of banning them

Bulgarian lawmaker Zhadko Markov has announced plans to strictly regulate the payday loan sector rather than banning it. The proposed legislative changes aim to protect consumers, particularly by preventing loans from being issued to individuals with gambling addictions.

Key measures in the comprehensive reform package include increasing the minimum capital required for registration and introducing simplified procedures for loans up to 500 euros, which would not require a guarantor. The initiative, which originates from the Ministry of Economy to transpose a European directive, also seeks to address the ‘shadow’ franchise model to prevent abuses.

A major component of the reform involves updating the interest rate calculation mechanism. Markov noted that the current formula has been non-functional since 2014. The new mechanism is intended to provide citizens with transparency regarding the total cost of credit to prevent debt cycles.