The European Union’s top court has issued a ruling aimed at protecting consumers across the bloc from hidden charges in the fast loan industry — a growing concern in Bulgaria, where thousands turn to non-bank lenders for quick cash but often end up deep in debt.
The European Court of Justice (ECJ) ruled this week that fees paid to so-called “professional guarantors” — third parties used by lenders to secure repayment — must be included in the total cost of a loan. If not, the borrower is only required to repay the original loan amount.
The decision comes after Bulgaria’s Sofia District Court asked the ECJ to clarify whether these fees — often undisclosed or poorly explained — should be considered part of the overall cost consumers bear.
Fast Loans, Big Risks
Bulgaria has one of the highest rates of poverty and financial exclusion in the EU, driving demand for fast loans that don’t require collateral or bank approval. But these loans often come with complex and costly conditions that consumers don’t fully understand until it’s too late.
In many cases, borrowers unknowingly sign two contracts — one for the loan itself, and a second with a guarantor company that charges hefty fees, sometimes equal to the loan amount. These guarantors are often affiliated with the lending company.
“This is one of the most common traps,” said attorney Bogomil Yordanov, who represents clients in financial disputes. “If you borrow 3,000 lev ($1,650), you may end up owing 7,000 lev or more because of the second contract.”
Some clients only realize they’ve agreed to a second contract after submitting their documents online and receiving a follow-up email with new terms.
Consumer Protection Victory
The court’s decision strengthens consumer rights across the EU and could force lenders in Bulgaria and beyond to change their practices. Under the ruling, if guarantor fees are not clearly included in the annual percentage rate (APR) of the loan, they cannot be enforced.
“The ruling means that lenders can’t hide costs through affiliated companies and later claim more money from borrowers,” Yordanov said.
Consumer rights advocates in Bulgaria say the decision is a significant step toward curbing abusive lending practices, but warn that public awareness and stronger enforcement are still needed.
“People need to read the fine print, even online,” Yordanov added. “But the law must also be enforced more strictly to prevent exploitation.”
The case is likely to set a precedent not only in Bulgaria but also in other EU countries where fast loan companies use similar practices.
