LAW PRESSES MORTGAGE LOANS ADVERTISING
All banks and companies lending money to the population will have to replace their advertising videos and billboards from September 30, 2006. They will be forced to do so in order to meet the requirements of the Consumer Credit Act which was adopted by the National Assembly on June 15 but will become valid three months after being published by the Official Gazette. The name of the document may sound misleading to some managers who may think its rules are only valid for consumer credits. However, as far as advertising is concerned this isn't the case. One can understand it by reading carefully art. 3, paragraph 4 of the Consumer Credit Act. These texts inform that all requirements to consumer loans ads are also valid for loans secured by real estates. Moreover, this is not subject to any debate.
Should banks and their advertising partners stick to the rules of the new document, we are no longer going to see videos with entertaining plots describing only the bonuses customers will get by using one credit or another. The same is also valid for the advertising boards showing happy faces of people who look as if they have hit the jackpot by borrowing from a certain bank, lease company, or crediting entity. Article 15 of the act contains an explicit obligation that the ad of a loan - either consumer or mortgage - contain the annual expense rate as well as the interest rate and other data related to the value of the loan. The annual rate is the total amount a customer pays to the lending bank (lease company or crediting house) every year and is calculated by a formula described in details in the appendix to the act. In case the calculation of the annual rate is not possible, the advertiser is obliged to give a representative example that makes the loan value absolutely clear.
These requirements may reflect on the attractiveness of the messages to people and as far as videos are concerned, additional information will probably extend their duration and will therefore make them more expensive. This is why lenders and advertisers are going to search for loopholes to fulfil the new regulations ficticiously. The first one can think of is to report quickly all terms related to the annual expense rate or either show or explain the representative example in a hurry. In this case the requirements of the law will be met, even though this most important information will remain unrealized or unnoticed by the customers. Lenders are also facilitated by the fact that the act does not stipulate the establishment of a special regulation specifying the requirements to consumer and mortgage loans advertising. Therefore, it will be very difficult to hold the dodging institutions responsible. In this case, customers' rights are not protected enough since if people decide to complain at the Commission for Competition Protection, for example, of being misled by an ad, they will find it hard to prove it. Still, according to art. 15 of the act institutions that offer consumer and mortgage financing are not the only ones that can be punished. The same is valid for the advertising agencies which launch misleading, dishonest or non-permitted comparative advertising.
The act fixes special fines for these violations. However, their amount is rather ridiculous. People who are directly guilty for the preparation and distribution of ads incompatible with the new requirements will be punished to pay between BGN500 and BGN1,000. Sole-proprietors and companies will be sanctioned between BGN1,000 and BGN3,000. Amounts of this kind will hardly scare the institutions and their officers who make campaigns worth hundreds of thousands of levs and aim at using them for economic effect worth tens of millions. It is only the fear that a sanction for dishonest ad will harm seriously the reputation of the sanctioned institution that may act as a barrier for a bank to use dishonest ad. However, some of the crediting companies do not find it a significant barrier. Therefore, it may be a good idea for legislators to think about a special regulation defining the terms of advertising mortgage and consumer credits as well as credits cards. It may also be wise to make the law impose higher sanctions for those who systematically violate the advertising requirements. Because acts with clauses that fail to work are too many in Bulgaria.