At the beginning of June 2025, the National Assembly of Bulgaria adopted a completely new law - Law on Credit Servicers and Credit Purchasers (LCSCP). This law implements the requirements of Directive (EU) 2021/2167, which establishes uniform standards for companies managing overdue loans and for the entities that purchase them. The directive aims to harmonize strategies for reducing non-performing loans and preventing their future accumulation.
The LCSCP establishes mechanisms to address accumulated overdue loans by developing a reliable secondary market. This market helps banks offload excess receivables, facilitates the cross-border transfer of credit exposures, and enhances consumer protection.
Chapter II of the LCSCP introduces a mandatory licensing regime for companies servicing non-performing bank loans, establishing minimum pan-European standards. This ensures that new entrants – such as international asset managers and investment funds – possess the necessary expertise and understanding of the local market. It also supports the release of risky receivables from banks while safeguarding the rights of debtors. Section V of the same chapter outlines mechanisms for cross-border supervision and regulatory coordination, while the supplementary regulations specify the procedural and technical details, fully transposing the licensing conditions set out in Directive (EU) 2021/2167.
With the adoption of the LCSCP, the following outcomes are expected:
- A significant increase in transactions involving such assets, both domestically and internationally, along with enhanced competition in the secondary market;
- Lower operating costs for buyers through more efficient servicing and resource pooling;
- Opportunities for banks to sell distressed portfolios to investors with expertise in managing credit risk;
- Alignment of Bulgarian licensing regulations with European standards;
- Greater transparency, predictability, and legal certainty ensured by specialized operators with the necessary expertise;
- The introduction of strict national oversight and clear regulations to reinforce debtor protection;
- The establishment of a coordinated supervisory framework between regulators for cross-border servicing companies;
- Prevention of future accumulations of overdue receivables, even under limited bank capacity;
- Broader opportunities for Bulgarian investors to acquire and manage foreign portfolios of non-performing loans.
The new Law governs only the voluntary framework for repaying overdue bank loans outside the judicial system, given the variation in national requirements and the absence of uniform European oversight. All court proceedings – including compulsory measures under the Bulgarian Code of Civil Procedure – fall outside its scope. The key distinction lies in the absence of state coercion in voluntary settlements: borrowers fulfill their obligations willingly, while management companies operate under strict licensing requirements and ethical conduct rules. In contrast, judicial enforcement through a bailiff occurs only after a voluntary settlement has failed and involves formal measures that the LCSCP explicitly excludes.