A last-minute legislative amendment in Bulgaria is raising serious concerns among financial experts, as it could put up to one million citizens at risk of falling into a debt spiral. The change restricts financial institutions registered with the Bulgarian National Bank from fully assessing the creditworthiness of their clients, potentially leading to lending and leasing decisions made without sufficient risk evaluation.

Lawyer Nikolay Tsvetanov, chairman of the Association of Responsible Non-Bank Lending, warned that the lack of proper credit checks creates an “absolute prerequisite for mistakes,” whether deliberate or unintentional. He highlighted that consumer loans and leasing contracts might now be issued “in the dark,” increasing the likelihood that borrowers could accumulate unsustainable debt. Tsvetanov estimated that nearly one million Bulgarians could be affected, noting that almost one in four has taken a consumer credit, and a similar number may rely on leasing for movable property purchases.

Despite the risks, the legislation still enforces a legal ceiling on loan costs through the annual percentage rate of cost, which provides some protection against excessive interest. Tsvetanov emphasized that consumers should not expect significant changes to the maximum rates unless they already hold financial products that exceed the legal limit. Under certain conditions, minor increases may occur according to the contract terms, but they must remain within the statutory ceiling.

Housing loans face a slightly different scenario. Tsvetanov noted that the Bulgarian National Bank has recently indicated that minimal interest rate increases could occur, but these changes would be largely outside the banks’ control. Overall, while the legal framework limits extreme cost hikes, the inability to thoroughly assess borrowers’ creditworthiness has introduced a substantial risk to both the consumer and financial sectors.