CONSUMER CREDITS: THE SWEETNESS AND BITTERNESS OF THE FORBIDDEN FRUIT
The forbidden fruit is the yummiest, wise men wrote in the Old Testament. Credits were such fruit for most Bulgarians until five years ago. Therefore, despite the high interest rates, the interest was great when in end-1998 DSK Bank, followed by other financial institutions, started releasing consumer credits. Within a year - in 1999 alone - the total amount of these loans doubled from BGN252MN to BGN495MN. By the end of June 2002 the aggregate sum went up significantly, reaching BGN1.29BN. This service became so popular that it was included in the menu of almost all big banks in Bulgaria. Some more affluent firms even include the allocation of consumer credits to their employees as an obligatory clause when closing contracts for bank services with the financial institutions. One could think that the loans are accessible for all citizens. But this is not so. For most Bulgarians this service has remained a dream that never came true. The reasons are many and various. The citizens get confused by the number of documents they have to fill when applying for a credit. They are required an armful of certificates about their incomes. The same documents should be privided by their guarantors as well. The very mentioning of the paperwork to be presented makes a lot of people give up their intention to draw a loan or guarantee it. But some more enterprising people take advantage of that and offer their services to citizens who want to apply for a credit. Of course, their aid costs a certain remuneration. It is said that such consultants offered their expert assistance to the people who wanted to buy goods from the Metro and Technopolis hypermarkets with a credit from United Bulgarian Bank (UBB). Under the arrangement, the consultants would get as remuneration 10% of the loan's amount in case they succeeded to get it from the bank. They helped the citizens to fill in the required documents and filed them at the credit institution. If the bank refused to extend the loan, the consultants excused for failing to help and gave up the remuneration. But in case the credit was allocated, the consultants took great merit to themselves and charged 10 per cent. In fact the loan had been extended not because of their canvassing but because the documents were filled in correctly and the applicant met the requirements. Such pseudo-consultants became such a plague that in June 2003 UBB had to publish a special announcement in the media, explaining that mediation of consultants was not necessary when applying for consumer credits. The allocation of loans to citizens is also slowed down by the rules, fabricated by managers of some of the banks' branches. In certain towns, for example, only employees of the local municipality or of a big firm (in most cases state-owned) are allowed to be guarantors. This is not a requirement of the credit institutions' headquarters in Sofia. In fact, these unwritten rules are in violation of the internal regulations for the allocation of loans. The faricated restrictions are quite convenient for the local bank managers as they allow them to refuse a credit whenever and whomever they want. However, those who know the right people always succeed to obtain a loan, even if they do not completely satisfy the requirements. The banks themselves also play tricks when launching consumer credits. In most loan contracts they do not specify the amount of all fees, paayble by the client when getting and repaying the loan. And they are not negligible.There is no accurate information about the fees (which are additional expenses to the applicants for consumer credits) in the ads brochures or in most loan contracts. They usually say the fees are charged in compliance with the bank's tariff. But the latter is not presented to the customers with the motive that the document is quite bulky (in some institutions it is more than 100 pages). Bank officials explain that anyone could get acquainted with the respective tariff from the INTERNET website of the credit institution. This sounds weighty but is not proper, because the consumer credits are intended for the average customers who are neither obliged to have a computer at hand, nor to be financial experts. The averge client expects the bank officials to explain him all the advantages and risks of the service he would eventually use. Therefore, if the credit institutions do really take care of their customers, they should include in the advertising brochures and loan contracts the amount of fees, charged from the borrowers of consumer credits.