Requirements for credit servicers and credit purchasers under the Credit Servicers and Credit Purchasers Act

Corporate Clients, Private Clients

The 51st National Assembly adopted the new Credit Servicers and Credit Purchasers Act 2025 (CSCPA 2025) on the 5th of June 2025, which was then promulgated in the State Gazette issue 50 of the 20th of June 2025. The latter introduced a number of requirements and distinctions regarding the figures of the credit purchasers and credit servicers.

Under the CSCPA 2025, all credit institutions, credit purchasers and credit servicers must bring their activities in compliance with the new legal requirements within 6 months of its entry into force (from the 20th of June 2025).

This article is intended to set out a summary on the purpose, scope and exemptions of the CSCPA 2025, the statutory requirements in relation to credit servicers and credit purchasers, and the specific statutory obligations imposed on the activities of credit purchasers and credit servicers in Bulgaria.

Purpose, scope and exceptions of CSCPA

1. Purpose and scope

The CSCPA 2025 establishes detailed regulations regarding the activity and supervision of persons carrying out activities related to the transfer, acquisition and administration of non-performing loans granted by credit institutions (NPLs), while aiming to ensure the protection of the rights of borrowers.

The CSCPA 2025 expressly provides that credit purchasers shall have the same rights and obligations vis-à-vis the borrowers as the previous creditors had vis-à-vis them prior to the transfer of the NPLs, while complying with the requirements of the borrower protection legislation applicable to the credit agreement. 

The competent authority supervising under the CSCPA 2025 is the Bulgarian National Bank (BNB), except for the supervision of consumer protection controlled by the Consumer Protection Commission (CPC).

2. Exceptions

The provisions of the CSCPA 2025 shall not apply to: 

• Activities related to the transfer, acquisition and administration of loans granted by financial institutions.
• Credit institutions established in the EU.
• Licensed or registered alternative investment fund managers.
• Financial institutions when they service their own consumer loans.
• Bailiffs within the scope of their profession.
• Lawyers and law firms when carrying out activities of legal representation and legal advice.
• Notaries in the scope of their profession.
• Credit institutions established in the EU when acquiring NPLs.
• NPLs acquired before the 20th of June 2025.
• Natural persons who acquired NPLs outside their commercial, business or professional activity.
• Servicing of NPLs granted by credit institutions established outside the EU, except in the case of replacement of the non-performing loan by a loan granted by a credit institution established in the EU.

Credit servicer

1. Definition

A credit servicer (CS) is a legal person established in a Member State authorised to engage in one or more of the following activities: 

• Collection or recovery from borrowers of payments due under NPLs.
• Renegotiation with borrowers the terms of NPLs in accordance with the instructions given by credit purchasers.
• Registration and resolution of borrowers’ complaints.
• Notifying borrowers of any change in interest rates or charges and of any payments due under NPLs.

2. Carrying out other commercial activities

CS may also carry out other commercial activities, including acquiring, in its own name and for its own account, receivables on NPLs, or by proceeding to out-of-court realisation of collaterals under the Special Pledges Act 1996.

3. Use of designations in the name

Only CS may use indications (in Bulgarian or a foreign language) that they are servicing credits. This may be included for example in their company name, advertising materials, or other documents as appropriate.

4. Legal form, structure and additional requirements

The following requirements are laid down regarding the legal form and structure of the CS: 

• Legal form – can be incorporated only as joint stock companies (in Bulgarian: АД or акционерно дружество).
• Registered office address – must coincide with the place where the CS is actually managed.
• Capital – there are no express requirements as to the value of capital (the minimum capital required for joint-stock companies under the Commerce Act 1991 is BGN 50,000), but the latter must be subscribed and fully paid up in cash (the possibility of increasing the capital through contributions-in-kind is excluded). The capital may not subsequently be reduced below the amount originally paid in.
• Capital contributions – can not be made with borrowed funds or with funds obtained as a result of criminal or other illegal activity, or with funds whose origin is unclear, i.e. a requirement for prior verification of the origin of funds, including upon incorporation of the company, is stipulated.
• Shares – only dematerialised shares, and where preference shares are issued, they can not provide more than one voting right (i.e. any other options for preference shares are available, including where voting rights are excluded).
• Management – can be performed by natural and/or legal persons with appropriate knowledge and experience to carry out the business competently and responsibly depending on the specifics of the business, where the latter must have:
  • good reputation;
  • not been convicted of a criminal offence (unless rehabilitated);
  • higher education qualification with a Master’s degree;
  • the necessary knowledge and skills, professional qualifications and at least three years’ professional experience in a position of managerial responsibility in the field of economics, law, finance or in the collection of unserviced debts;
  • always acted transparently, openly and cooperatively with supervisory and regulatory authorities in their previous activities and have complied with instructions, recommendations and administrative enforcement measures received;
  • not been declared bankrupt as a sole trader or unlimited partner in a company, or have not been a member of the management or supervisory body of a company against which insolvency proceedings have been opened or which has been declared bankrupt, unless they have been reinstated.
• Shareholders – can be natural or legal persons, where shareholders holding qualifying shareholding (direct or indirect ownership of 10% or more of the capital or of the voting rights, or such a shareholding that provides the opportunity to exercise significant influence over management) should be in good standing.
• Professional indemnity insurance – covers damages resulting from the CS’s culpable failure to perform its duties. The minimum sum insured for one insured event should be BGN 50,000 and for all insured events in one year should be BGN 2,000,000.
• Website – should be up to date and the Policy for the Protection, Fair and Ethical Treatment of Borrowers and the Policy and Procedures for the Handling of Complaints from Borrowers (see below) should be available on the CS’ website.
• Accounting and auditing – the accounting records of the CS shall be organised and operated in accordance with the Accounting Act 2016, International Accounting Standards and other applicable provisions of the CSCPA 2025, and the annual financial statements shall be subject to a statutory independent financial audit by an audit firm registered under the requirements of the Independent Financial Audit Act 2016.
• BNB Reports – the CS submits financial statements and other financial and statistical information to the BNB.

5. Internal rules and procedures

CSs are required to implement sound policies and procedures to manage their operations, which include:

• Document containing clear information about the organizational structure (e.g., org chart).
• Document containing the terms and conditions for outsourcing (e.g. General Terms and Conditions) and an outsourcing policy – where the CS intends to outsource part of its activities to third parties.
• Liability rules that are clearly defined, transparent and consistent – the law does not make clear to whom liability should be directed, but presumably this includes credit institutions, credit purchasers and borrowers.
• Procedures and internal control mechanisms to ensure sound and prudent management (e.g. Rules of Internal Organisation; Board of Directors’ Rules of Procedure, etc.).
• Rules and procedures to ensure business continuity.
• Policies for the protection, fair and diligent treatment of borrowers.
• Rules and procedures for handling complaints received from borrowers.
• Policies and procedures to control and prevent money laundering and countering terrorist financing.
• Rules, measures and procedures for the safeguarding of funds where such funds are received and held on behalf and for the account of credit purchasers. 

6. License

License application and required documents

The activities of CSs are subject to license, where for the issuance of the latter CSs shall submit a written license application in accordance with an approved form to the BNB, to which they shall provide evidence of the existence of the necessary legal form, structure and requirements (as per paragraph 4 above), the adoption of the relevant internal rules and procedures (as per paragraph 5 above), as follows:

• Memorandum and Articles of Association.
• Document containing information on the governance structure.
• Information on the registered office address.
• Certified copy of the Shareholders’ Register and a Shareholders’ List of the shareholders with qualifying holdings.
• List of the individuals who will manage the CS.
• Certified copies of the identity documents of the managing persons and persons holding qualifying holdings.
• The following documents in respect of the managing persons:
• • criminal record certificate, in case the managing person is not a Bulgarian citizen (with regard to Bulgarian citizens the verification is carried out ex officio);
• • document certifying the completion of higher education with an acquired educational qualification degree “Master”;
• • questionnaire-declaration of professional qualifications, reliability and good reputation; 
• • documents certifying professional experience;
• • declaration that the person concerned is not bankrupt or a member of the management or supervisory body of a company which is or has been the subject of insolvency proceedings.
• Outsourcing Policy and certified copy of Outsourcing Agreements – where the CS intends to delegate part of its activities to third parties.
• Policies and procedures that include governance arrangements and internal control mechanisms, including robust and effective administrative and accounting procedures, to ensure robust and prudent governance (incl.  Internal Organisation Rules; Board of Directors’ Duties Rules, etc.).
• Rules and procedures ensure business continuity.
• Policies for the protection, fair and diligent treatment of borrowers.
• Rules and procedures for handling borrowers’ complaints.
• Agreement with a credit institution for servicing a special bank account and certificate of the existence of the special bank account and – in the event the CS will receive funds from borrowers on behalf of credit purchasers.
• Insurance Policy evidencing professional liability insurance with appropriate minimum single occurrence and aggregate limits.
• Policies and procedures to control and prevent money laundering and terrorist financing.
• List of offices from which the CS will operate.
• Document certifying payment of the license fee (unless the latter is paid electronically).

Review of the license application and response deadline

BNB shall verify the completeness of the application and the documents attached thereto within 45 days of receipt, and may require the submission of additional documents and information within a period of not less than 10 days. As part of the procedure for examining the license application, BNB shall also send the documents to the CPC for an opinion. 

The BNB shall take a resolution on the license application within 90 days from the date of receipt of the license application, except in cases where an additional period is granted for the correction of irregularities or the provision of additional information. 

If the license application for an authorisation is refused, it can be resubmitted, but not earlier than 6 months after the refusal entered into force.

Credit Purchasers

1. Definition

A credit purchaser is any natural or legal person, whether a trader or not, who is not a credit institution and who, in the course of his commercial, business or professional activity, acquires receivables on NPLs.

2. Receivables administration activities

For the administration of own receivables under NPLs with consumers, the credit purchaser is obliged to obtain a stand-alone CS license or enter into an Outsourcing Agreement with credit institution or CS.

The administration of own acquired receivables under NPLs with legal persons may be carried out by the credit purchaser without license, or, at its discretion, by entering into an Outsourcing Agreement with credit institution or CS.

Specific Obligations under the CSCPA 2025 with respect to CSs and credit purchasers

The CSCPA 2025 introduces several specific obligations that are applicable to credit purchasers and CSs.

1. Requirements for fair treatment of borrowers

The CSCPA 2025 explicitly introduces the obligation to treat borrowers fairly, respecting their rights and interests.

In this regard, CSs and credit purchasers are required to:

• Provide information that is clear, understandable, not misleading and not deceptive.
• Respect and protect consumer privacy, including by:
  • not making phone calls between 8:00 p.m. and 7:00 a.m., or on weekends or holidays;
  • not contacting, in connection with or relating to the receivables, persons against whom the receivables have not been assigned;
  • display notices and information about the consumer’s debt in any form in public places.
• Apply rules of ethical conduct and communication with borrowers.
• Not engage in aggressive or deceptive commercial practices.
• Communicate only by making telephone calls or requests in writing and electronically addressed to the debtor in person. Credit purchasers and CSs shall provide the debtor with the opportunity to visit their office on their own initiative.
• Comply with data protection legislation.

2. Obligation to notify borrowers. Assignment notice

Credit purchasers or CSs (where expressly instructed by the credit purchaser) are required to notify borrowers upon assignment of the NPLs. The assignment notice shall be sent after each assignment of a receivable and always prior to the first collection action and upon request of the borrower. The assignment notice shall be signed by both the assignor – credit institution and the assignee – the credit purchaser, and shall be provided to the borrower free of charge. 

The assignment notice must be in the Bulgarian language, written in a clear and understandable manner, free of any wording that contravenes the regulations, free of any false, incomplete, misleading or deceptive information or information that conceals or disguises important facts and circumstances, and free of any ambiguous or inaccurate information that would cause the borrower to form a false impression or inference about the CS. 

The following particulars must be present in the notification of transfer:

• Information about the transfer, including the date of the transfer.
• Identification and contact details of the credit purchaser.
• Identification and contact details of the CS or credit institution where the credit purchaser has outsourced the credit servicing activities.
• Details evidencing the authorisation issued where the credit purchaser has outsourced credit servicing activities to the CS and where the credit purchaser is self-servicing under a credit agreement.
• Identification and contact details of the external contractor, where applicable.
• Clearly identified contact person or unit for the provision of information by:
  • the credit purchaser;
  • a credit institution when outsourcing credit servicing activities;
  • CS – in the case of assignment of credit servicing activities;
  • an external contractor, where applicable.
• Information on the borrower’s debt as of the date of sending the notification, containing the type and amount of the receivable, its basis, the date of maturity of the receivable, if declared and known, the amounts repaid so far – by type, amount and date of repayment, and all amounts due, including principal, interest, fees and other charges, stating the methodology for calculating the statutory interest to be charged on the interest-bearing portion of the NPL as of the date of sending the notification.
• Indication of the applicability of Bulgarian and European Union law in the field of enforcement of contract law, consumer protection, borrowers’ rights and criminal law after the assignment of the claim.
• The purposes for which the personal data are processed and the legal basis for the processing; the type of personal data; the period of retention of the personal data or the criteria to be used to determine that period; the existence of a right of access, rectification, erasure of personal data; the existence of a right to restrict the processing of personal data, to object to processing or to transfer personal data.
• The name, address and contact details of the competent authorities for lodging a complaint in the Member State in which the borrower is habitually resident or has its registered office address, or of the Member State in which it has its head office where, under national law, it has no registered office address.
• Information on the right of defence in the case of limitation periods, unfair terms in the agreement with the original creditor and the possibilities of legal challenge where the borrower is a consumer.

3. Credit servicing agreement

Form

The credit purchaser shall assign the performance of the CS’s receivables servicing activities by entering into a credit servicing agreement, which shall be in writing, clearly and understandably worded and executed in at least two copies.

Content of the credit servicing agreement 

The following mandatory content is provided for in the credit servicing agreement:

• Detailed description of the management and servicing activities carried out by the CS;
• Amount of the CS’s fees and, where they can not be specified, the manner in which they will be calculated;
• Range of activities in respect of which the CS represents the credit purchaser in its relationship with the borrower.
• Obligation for the parties to comply with the requirements of the CSCPA 2025, the European Banking Authority Guidelines and the regulatory technical standards applicable to the collection of receivables arising from NPLs, including in relation to consumer protection and data protection.
• Clause requiring fair and diligent treatment of borrowers.
• Requirement that the CS notify the credit purchaser prior to outsourcing one or more credit servicing activities.

4. Notification of use of CS

The credit purchaser shall notify BNB of the name and address of the CS with which the Credit Servicing Agreement has been entered, at the latest on the date on which the performance of the agreement begins.

In the event of a change in the circumstances of the CS, the credit purchaser shall notify BNB of the change by the date of the changed circumstance at the latest and shall indicate the name and address of the new CS.

5. Reports on transfer of receivables on non-performing loan from credit purchasers

By the 30th of June and by the 31st of December of the respective calendar year, credit purchasers shall provide the following information to BNB when transferring receivables on NPLs to another credit purchaser:

• Identification data of the new credit purchaser and its CS.
• Total amount of receivables on NPLs assigned.
• Number and individual amount of receivables on NPLs assigned.
• Availability and types of collateral for the transferred receivables.

If necessary, BNB may require credit purchasers to provide the information on a quarterly basis. BNB may also require additional information on transferred receivables on NPLs.