20 years together

April 2014

30 April 2014

On April 4, 2014 Assoc. Prof. Dr. George Dimitrov, Partner at Dimitrov, Petrov & Co. Law Firm, was invited as a guest in the TV program “A Matter of Point of View” which focused on the topic “Fraud for Millions on the Internet” which was broadcast by the news channel NEWS7.

Assoc. Prof. Dr. Dimitrov explained the types of fraud and commented on their range and negative consequences.

NEWS7 is the biggest CNN affiliate for Eastern Europe.

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On April 14-15, 2014 Ms Veneta Donova, Attorney-at-law at Dimitrov, Petrov & Co. Law Firm, was invited as a lecturer at the third South East Europe (SEE 3)/RIPE NCC Regional Meeting held in Sofia. It offers network engineers and other technical staff the opportunity to share knowledge and experience, and to identify areas for regional cooperation.

During the second day of the conference, Ms Donova presented on the topic “Net Neutrality and Law”.

The event was hosted by the RIPE NCC, an NGO supporting internet infrastructure together with BIX.BG, the first neutral Bulgarian Internet Exchange Point (IXP).

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Act for Amendment and Supplement to the Consumer Credit Act

In the State Gazette, issue 35 of April 22, 2014, the Act for Amendment and Supplement to the Consumer Credit Act (CCA) was promulgated.

The main amendments introduced by the act involve removing the minimum amount of consumer credit, introduction of new requirements with regard to the form and contents of the credit agreement for consumers, to the unilateral change of the total cost of the credit and to the terms and conditions for collecting charges and commissions for additional services. The right of the creditor to compensation or penalty in case of early repayment of the credit under certain conditions is also regulated.

With the amendment of Art. 4 of CCA the lower limit of consumer credit amount is removed. In this way the scope of the Act will cover all credit agreements for total amount of up to BGN 147 thousand, and not only those for amounts exceeding BGN 400. The only specific feature of the credit agreements for total amount lower than BGN 400 will be that the right of refusal under Art. 29 of CCA will not apply with regard to them.

The scope of the requirements regarding the form, the methods of conclusion, the contents, the interest rate, and the conditions for early repayment, applicable to credit agreements or agency agreements for provision of credits secured by a mortgage or another comparable lien on real estate, as well as to credit agreements or agency agreement for provision of credit for the purpose of acquiring or preserving the title over land or another real estate, including a building which has been or will be constructed (hereinafter referred to as “mortgage credit agreements”).

A requirement is introduced for the information in the pre-contractual phase, providing for the general terms and conditions, and all elements of the credit agreement for consumers to be provided to the consumer in an identical form and with the size of the font not smaller than 12.

New Para. 4 of Art. 10 is created, and it provides that an unilateral change of the total cost of the credit to the consumer is allowed only if the credit agreement   expressly provides for a possibility to increase or decrease the total cost of the credit, and at the same time the conditions applying to the change of the total cost of the credit are described in the agreement and are objectively justified, being beyond the control of the creditor. Тhe newly created Para. 5 of the same article provides that any provision which is contrary to or circumvents the requirements of Para. 4 shall be null and void.

New Art. 10a is created, and it governs the terms and conditions for collecting charges and commissions for additional services connected with the credit agreement for consumers which the creditor could collect from the consumer. Тhe collection of charges and commissions for activities related to the management and receipt of the credit is prohibited. It is also expressly provided that the creditor could not collect more than once a charge and/or a commission for one and the same activity. A new requirement is introduced аccording to which the type, the amount of the charges and/or commissions, and the activity for which they are collected shall be accurately and clearly specified in the consumer credit agreement.

The amendment in Art. 11 of CCA, in addition to the mandatory requisites of the consumer credit agreement, provides for the methodology for calculating the referent interest rate. Pursuant to the amendments in Art. 33a of CCA, the methodology should contain a clear written calculation procedure (a formula) specifying the type, quantity parameters and relative weight of the separate components (market indexes and/or indicators).

The new Para. 2 of Art. 11 explicitly stipulates that the general terms and conditions are an integral part of the consumer credit agreement and introduces the requirement that the parties to the agreement should put a signature on each page thereof. Non-compliance with this requirement results in nullity of the credit agreement.  

The newly added Para. 5 of Art. 11 provides that in mortgage credit agreements, the creditor shall give the consumer the right to choose to conclude a credit agreement by which: either (a) the creditor should be   satisfied fully and finally to the  amount of the security under the agreement after enforcement on the security through a court procedure or after a sale by the consumer with the creditor’s consent, or (b) in case of enforcement, the consumer should be liable under Art. 133 of the Obligations and Contracts Act, i.e. all the property of the debtor should serve as general security of the creditors.
 
The newly created Para. 4 of Art. 19 of CCA envisages the maximum annual percentage rate to be equal to five times the amount of the statutory interest on overdue liabilities in levs (BGN) and in foreign currency, as regulated by  a decree of the Council of Ministers of the Republic of Bulgaria. Clauses in a contract by way of which this amount is exceeded are declared void. Besides, in case of payment under a contract with such a null clause, the overpaid amounts exceeding the maximum shall be deducted in next payments under the credit agreement.

A new Para. 8 is created in Art. 32 which provides that the creditor is not entitled to a compensation or default penalty in case of early repayment under a mortgage credit agreement, when the credit is discharged after payment of 12 monthly instalments as of its receipt. Apart from this case, the creditor under a mortgage credit agreement is entitled to a fair and objectively justified compensation for the possible expenditure directly connected with the early repayment of the credit, the compensation being up to 1 per cent of the prematurely repaid amount of the credit.

In the Additional Provisions of CCA the following legal definition of the term "Variable interest rate under the credit" is introduced: the interest rate to be specified in a clause of the credit agreement by virtue of which the creditor and the consumer stipulate that the interest rate applicable to the credit agreement for consumers is formed on the basis of a variable component (a referent interest rate) and a fixed surplus. The fixed surplus may not be unilaterally changed for the whole term of the credit agreement. The definition of the term "Referent interest rate" is amended, as follows: the interest rate used as the basis for calculation of the variable interest rate under the credit applicable to the consumer credit agreement. It is the market index LIBOR, EURIBOR, SOFIBOR, and/or indicators published by the Bulgarian National Bank and/or the National Statistical Institute, or a combination of such indicators.   

The amendments set forth above enter into force as of 23.07.2014.

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