WORLD BANK Bulgaria: Diagnostic Review of Consumer Protection and Financial Capability Sofia, 13 April 2009 Martin Melecky Financial Economist World Bank

WORLD BANK 2 Key Measures Recommended I. Improve the quality and user-friendliness of consumer disclosure II. Strengthen business practices of financial institutions vis-à-vis consumers

WORLD BANK 3 I. Consumer Disclosure Key Facts Statements for all standard retail financial products Simple, short description of key terms and conditions of contracts; In plain language and comparable across products and institutions; Not only consumer credits, but also other financial products; Include information on where to submit complaints and disputes; Standard format developed by professional associations, and reviewed by the supervisor; Should be tested to ensure consumers understand and use them.

WORLD BANK 4 I. Consumer Disclosure Consumers should have easy access to full contractual terms and conditions before applying for a product Advertising for financial services should be monitored to ensure it is not misleading Tariff surveys comparing prices of financial products could increase transparency and disclosure discipline. Disclosure for pensions products should be improved Investment returns to be presented on a risk-adjusted basis; Inform consumers about FSC’s on-going work to estimate payouts and annuities.

WORLD BANK 5 II. Business Practices Codes of conduct prepared by professional associations Implemented in all financial sub-sectors and widely disseminated; Compliance monitored by CPC and professional associations; Non-compliance published by CPC and professional associations; All providers of financial services to be registered and supervised. Practices of financial products sellers should be improved All sellers could be subject to a training and certification scheme; Insurance and pension companies to be liable for agent’s actions; Consumers to chose the provider of linked financial products.

WORLD BANK 6 II. Business Practices Customer account handling procedures should be improved Monthly statements and timely notification of events related to their accounts; For securities, regulation is needed regarding timely closing of customer accounts and prompt payment (or transfer) of funds. The credit reporting system should be strengthened Financial education initiatives should include credit reporting; Include reporting from utilities and advance development of credit scoring; Credit bureaus should be obliged to inform consumers of their personal credit scores on regular basis

WORLD BANK 7 For more information Published World Bank reports Consultative Draft on Good Practices available at

WORLD BANK Bulgaria: Diagnostic Review of Consumer Protection and Financial Capability Sofia, 13 April 2009 Martin Melecky Financial Economist World Bank