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FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.
Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.
As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.
Introduction
Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services
Loan-giving, factoring, brokerage and finetrading are broadly used in Bulgaria, but FinTech mechanisms to provide these services, respectively to receive such services, appear to be mainly used by consumers (non-commercial utilizers) for short-term to very short-term loans. Corporate financing is mainly provided through traditional mechanisms.
Legal affairs
Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
Loan-giving, factoring, brokerage, finetrading as well as any other form of financing, shall be provided only by licensed credit institutions or registered financial institutions, whether the services are provided through FinTech mechanisms or through traditional ones.
The Credit Institutions Act (CIA) being the main national regulation, EU regulations, such as Regulation (EU) 575/2013, shall be also complied with. A considerable number of national ordinances, such as Ordinance 26/23.04.2006 regarding financial institutions, apply as well. The provision of services itself is additionally regulated. Thus, in case the provision of services is directed to consumers, the Consumers Credit Act and the Consumers Credit Related to Immovable Property Act must also be observed.
All activities related to financing shall abide by the AML regulations and data protection regulations.
In order to operate as a credit institution, the legal entity has to acquire a license. The financial institutions are subject to a registration regime.
The supervising authority in both cases is the Bulgarian National Bank (BNB).
In order to be registered as a financial institution, the legal entity has to comply with the initial owned capital requirements (min BGN 1,000,000.00 approx. EUR 511,000.00), with the reputation and good standing requirements. The registration fee itself is 3,000.00 BGN (approx. 1,511.00 EUR).
Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area