In Bulgaria, there has been a significant rise in the use of quick loans, a trend driven by several factors. According to Bogomil Nikolov, chairman of the "Active Users" Association, the country's banking system has created a niche for these types of loans due to the cumbersome procedures involved in traditional bank loans, particularly for smaller amounts. Although credit cards, which typically offer better interest rates, are less common in Bulgaria compared to other countries, many Bulgarians prefer the more expensive quick loans for their ease of access, Nikolov noted during an interview on Bloomberg TV.

Nikolov highlighted that people are not only using quick loans out of necessity but also for discretionary spending. This behavior reflects the financial culture prevalent in Bulgaria. He pointed out that fast credit companies have tightened their lending conditions, making it harder to obtain a loan with just an identity card. This raises the question of why individuals with the means to secure bank loans still opt for quicker, albeit more expensive, credit options.

Despite ongoing discussions about introducing a personal bankruptcy law in Bulgaria, the country remains the only EU member without such legislation. While the law is included in the National Recovery and Resilience Plan (NRRP), it has yet to be enacted. Nikolov explained that other countries with personal bankruptcy laws have seen credit institutions become more cautious, knowing that defaults could lead to bankruptcy.

Fast loan companies often face lawsuits in favor of consumers, but these cases are infrequent. Nikolov suggested that if a representative claims law were passed, it could reduce the aggressive lending practices of these companies, leading to fewer bad debts and improved practices. Currently, fast loan companies continue to issue large amounts of credit, compensating for potential defaults with high fees and interest rates paid by solvent consumers.

Nikolov criticized the high costs associated with quick loans, noting that while the legal cap on annual percentage rates (APR) is set at about 67-68%, loans are frequently issued at rates exceeding 100-200%, and sometimes even 300% per year. These high rates are often accompanied by hidden fees, exacerbating the cost to borrowers.

The market for small consumer loans is dominated by payday loan companies, with few major banks competing in this sector. Even with the entry of large banks, payday loan companies have managed to maintain and grow their market share. Nikolov expressed concern that this lack of competition and the prevalence of high-interest loans could lead to systemic issues in the event of a financial crisis.

He also emphasized that quick loan companies compete primarily on the speed of loan approval rather than on the cost of the loan. Nikolov urged caution and advised that quick loans should only be used as a last resort. He called for a comprehensive information campaign and improved financial education in schools to better inform consumers about the risks associated with quick loans.

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