Protection of consumers of financial products and services
Have you ever thought about how much our behavior in managing our personal finances and using financial products and services has changed over the years? They are becoming more numerous, more diverse and more complex, and access to them and to financial markets is becoming increasingly easier, mainly due to digitalization. Along with the benefits, this dynamic development brings a number of challenges and highlights the need for comprehensive protection of consumers of financial products and services.
What is the aim of consumer protection policies for financial services and products?
In general, to ensure fair and responsible treatment of consumers when purchasing and using financial products and services, as well as in their interactions with the companies that provide them. Consumer protection policies are essential for maintaining the stability of the financial system and trust in it. When consumers feel secure, they are more likely to invest, save and use financial products and services, which supports overall economic development.
What do these policies cover?
Consumer protection policies are complex in nature and cover a number of areas. Their implementation relies on an adequate regulatory framework and institutional infrastructure, including the relevant supervisory authorities with the necessary powers. The principles on which consumer protection policies for financial services are based are aimed at:
- ensuring fair and honest treatment of consumers and stable functioning of financial markets
- disclosing information about financial products and services and offering quality options
- ensuring confidentiality and protection of personal data
- providing effective mechanisms for resolving consumer disputes
- providing mechanisms for protecting consumer assets – for example, in the event of the bankruptcy of a provider of financial products and services, as well as in cases of fraud or abuse.
Another guiding principle is increasing consumers’ financial literacy and awareness. This way, they can make reasonable well-informed financial decisions, effectively assert their rights, and fulfill their obligations when using financial products and services.
These general principles are reflected in real and detailed terms in both European and national legislation and in the regulatory framework.
What are the main institutions in Bulgaria that ensure the protection of consumers of financial products and services?
It is good to be informed on this issue, to understand the powers of these institutions and to know which one to turn to for assistance or in case of a problem.
Financial regulators: Bulgarian National Bank and Financial Supervision Commission
The main goal of the regulators - the Bulgarian National Bank (BNB) and the Financial Supervision Commission (FSC) - is to maintain the normal functioning, stability and trust in the financial system of Bulgaria. They supervise the activities of market participants, including in their relation with consumers. They also conduct preliminary control when admitting new market participants through licensing and other regimes and have a wide range of other powers.
The BNB regulates and supervises the banking system in order to protect the interests of depositors and ensure the functioning and development of efficient payment systems. The BNB is also responsible for maintaining the stability of the national currency.
The FSC regulates and supervises various segments of the non-banking financial system – the capital and insurance markets and the supplementary pension insurance market. Another main function of the FSC is to protect consumers of non-banking financial products, including through information and educational tools and campaigns.
Institutions for the protection of consumer rights
The Commission for Consumer Protection (CCP) is the state authority that protects the rights of consumers and ensures their safety when purchasing goods and services. It is an independent administrative body that enforces consumer protection legislation in Bulgaria and exercises administrative control over the entire internal market. Among the main activities of the CCP are control over unfair commercial practices, removal of unfair clauses in the general terms and conditions of consumer contracts and regulation of distance selling. Consumers can file a complaint with the CCP regarding a problem that has arisen with a trader.
One of the rights of consumers is the option to resolve the dispute/problem out of court through an agreement with the trader. This is provided for in the Consumer Protection Act and for this purpose, general and sectoral conciliation commissions have been established within the CCP to resolve consumer disputes. Five of them are authorized to handle disputes related to financial products and services.
Institutions in Bulgaria that guarantee the assets and claims of consumers in the event of the bankruptcy of a financial service provider
The Bulgarian Deposit Insurance Fund (BDIF) guarantees full repayment of deposits of up to EUR 100 000 per depositor per bank, regardless of their number and size, if the Bulgarian National Bank revokes a bank’s license or declares the deposits in it unavailable. The BDIF also guarantees this amount when, due to a court ruling, depositors do not have access to their funds in the bank for reasons directly related to the bank’s financial condition. Deposit guarantee applies on a “per depositor per bank” basis – each depositor is covered individually at every member bank of the deposit guarantee system in Bulgaria.
The Security Fund, managed by the Guarantee Fund, guarantees and pays:
- Claims/due compensations of injured parties under the Motor Third Party Liability Insurance and Accident Insurance for passengers in public transport. The claims of each person are guaranteed in full up to the minimum mandatory insurance limits.
- Claims under "Life" insurance of each insured person in total amount of up to EUR 100 000.
The Investor Compensation Fund ensures the payment of compensation to the clients of investment intermediaries when the investment intermediary is unable to fulfill its obligations to the clients due to reasons directly related to its financial condition (e.g. bankruptcy). The Fund guarantees compensation equal to 90 percent of the value of the claim, but not more than EUR 20 000.
Useful links:
Financial Supervision Commission
Commission for Consumer protection
Bulgarian Deposit Insurance Fund
This article has been prepared with the support of the OECD, as part of the project "Strengthening the Capacity for Implementation of the National Financial Literacy Strategy", funded by the EU through the Technical Support Instrument. This material is for informational and educational purpose only. It does not constitute investment advice, a recommendation or offer to buy or sell financial instruments, or the provision of any other type of investment services. More information can be found here.
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