Financial institutions offer a wide range of financial products and services. European and Bulgarian legislation includes a number of provisions aimed at consumer protection, which regulate in detail the rights and obligations related to financial products and services. These provisions are aligned with the specifics of different types of financial products and services and are provided for at each stage of their use - selection, use, termination of the service.

Particular focus is placed on the selection process and the provision of clear, sufficient information about the relevant product or service in standardized forms, in order to facilitate consumers and make it possible to compare individual offers. Consumer rights are regulated in relation to receiving professional advice on the choice of a financial product, as well as on the resolution of consumer disputes in relation to the use of a financial product.

Of course, when concluding a contract for a financial service or product, consumers assume the relevant obligations. For example, they must pay the stipulated instalments, fees, and expenses in a timely and correct manner, familiarize themselves with the information provided, bear the consequences of failing to comply with the terms of the contract, submit and promptly update personal information necessary for the provider in connection with the provision of the product, etc.

Here are some of the basic rights in the most commonly used financial products and services.

 

In case of accounts and payments

Consumer rights in this area are regulated in the Payment Services and Payment Systems Act and other regulatory acts.

-          Right to information about fees and other conditions

Before you conclude an account opening agreement, payment service providers (banks, payment institutions, electronic money companies) must provide you with a document with information about fees. It describes the main services offered in connection with the account and all fees that you may have to pay. This information is available on the websites of payment service providers and can also be checked in person at their offices. At least once a year, you must be provided with a statement with information and explanations about the fees and, if applicable, the interest applied to your account.

 

 In case of loans

Consumer rights are regulated in the Consumer Credit Act and the Consumer Credits Related to Immovable Property Act.

-          Right to preliminary/pre-contractual information in a standardized form

Regardless of the type of credit – consumer, housing, mortgage, commodity, leasing, the creditor must provide you with a Standard European Form (Standard European Consumer Credit Information Form[1]). It contains:

·         the amount and term of the credit,

·         the interest rate and its type,

·         the total amount to be repaid on the credit,

·         the annual percentage rate of charge (APR) - the total amount of the costs expressed as an annual percentage of the total amount of the credit,

·         the number, frequency and amount of the repayment instalments,

·         the conditions for early repayment,

·         other essential information.

 

-          Right to withdraw from the loan agreement

Taking out a loan is a serious decision, so the legislation provides consumers with options for reflection and the ability to cancel.

• • • In case of mortgage and housing loans

After you receive a draft contract, you have the right to reflect and withdraw from the offer. The reflection period is explicitly stated and cannot be shorter than 14 days.

• • • In case of consumer loans

The legal option to withdraw is available up to 14 days from the conclusion of the loan agreement. If you decide to cancel within this period, you must inform the lender in writing and return the amount received, along with interest and other costs related to its granting, within 30 days.

 

-          Right to early repayment

Borrowers have the right to repay their obligations early, either in full or in part. There are also some specifics.

• • • In case of consumer loans

The creditor is not entitled to collect a fee for early repayment if the loan has a variable interest rate or is in the form of an overdraft. Such a fee may be required for loans with a fixed interest rate, the amount of which is specified in the Consumer Credit Act.

• • • In case of mortgage and housing loans

The creditor is not entitled to demand fees or other compensation for early repayment if you have paid at least 12 monthly instalments. However, if you decide to repay your debt earlier, the creditor is entitled to compensation in the amount of a percentage of the amount repaid early, specified in the Consumer Credits Related to Immovable Property Act.

 

-          Right to information about the interest rate on the loan

Loan interest rates are fixed or variable. The fixed interest rate is determined when signing a loan agreement, it is permanent and applies for the entire term of the agreement or for a certain period of time. The variable interest rate is formed by two elements - a reference interest rate and a contractual fixed allowance, which is determined individually for each consumer. The reference interest rate is calculated by the bank according to a certain methodology, which is publicly disclosed. The methodology and the fixed premium are described in the loan agreement and can be changed only with the consent of both parties. Credit institutions are obliged to inform their clients of upcoming changes in the reference interest rate.

-          Right to choose when concluding insurance related to the loan

Banks may require insurance in connection with a granted loan and usually offer such products to consumers. However, you have the right to conclude a policy from another insurer of your choice, as long as it covers the risks required by the creditor bank.

 

In case of insurance products

Consumer rights are regulated in the Insurance Code and other regulatory acts.

-          Right to preliminary information in a standardized form

Before concluding an insurance contract, the person selling you the insurance should provide information about themselves and indicate their role – whether as an employee of the insurance company, as a broker or an agent. You should be provided with an information document for the relevant product in a standardized form, which will help you compare different offers. It should contain:

·         the name of the insurance product and the insurance company providing it,

·         the type of insurance and its validity period,

·         the scope of risk coverage, amounts and limitations,

·         your obligations,

·         the terms of payment of premium contributions,

·         the methods of terminating the contract.

 

In case of retail investment products

In this area, consumer rights are regulated in the Collective Investment Schemes and Other Undertakings for Collective Investments Act, the Markets in Financial Instruments Act, the Insurance Code, the Social Insurance Code.

Consumers can benefit from a variety of retail investment products - various types of investment funds, life insurance with an investment element, structured products and deposits. They are offered by a wide range of financial institutions, including banks, life insurance companies, management companies, and investment intermediaries. These products are often complex, and it is difficult for consumers to understand their characteristics, risks, costs and potential profitability. Therefore, the legislation provides various measures to ensure a higher degree of protection of the interests of retail investors. For example, there are legal requirements regarding the way information is presented, how investment advice is given, and how each client’s risk profile is assessed to ensure that the products offered are suitable for their investment needs and risk tolerance.

-          Right to basic information in a standardized form about the investment

To ensure comparability of different offers, a legal requirement has been introduced that information about a given investment product is provided to consumers in a standardized form through the so-called "Key Information Document". This document includes:

·         information about the provider of the investment product,

·         description of the product, term, etc.,

·         explanation of the main factors on which the return depends,

·         risk level (on a scale from 1 to 7),

·         maximum possible loss from the investment plus 4 appropriate scenarios for the results - crisis, pessimistic, moderate and optimistic,

·         information about costs,

·         ways to file complaints.

 

The Key Information Document must be provided to the consumer early enough to give them time to consider the various options before signing a contract. Even if there is a withdrawal period, the document must be provided before the contract is signed.

More information about insurance and investment products, as well as supplementary pension insurance, including your rights, can be found on “Your Finances” – the dedicated to consumers’ page of the Financial Supervision Commission.

 

Main regulatory acts:

Payment Services and Payment Systems Act

Consumer Credit Act

Consumer Credits Related to Immovable Property Act

Insurance Code

Collective Investment Schemes and Other Undertakings for Collective Investments Act

Markets in Financial Instruments Act

Social Insurance Code