With increasing inflation and the COVID-19 crisis, more and more consumers are turning to companies offering online loans, as their issuance is extremely easy and accessible from anywhere in the country. However, with the growing number of online loans being taken out, there is also a rise in unpaid or so-called “bad loans” obtained online. More and more consumers are contacting us with cases related to unpaid online loans, some of which were even taken out quite some time ago.

Here are some of the main cases related to online consumer loans that various citizens are dealing with:

• I repaid the money early, but they kept calling and harassing me. Later, they filed a lawsuit against me, but I didn’t keep the note that I paid.
• I didn’t take out an online loan, but I received a court summons stating that I owe a sum for an online loan.
• I’m not sure I withdrew the exact amount for this loan, but they’re currently claiming the same amount from me.
• I withdrew a specific amount, but they’re now demanding double or triple the amount I withdrew.
• My debt has been transferred to a collection agency, and I don’t have access to the documents in my file.
• My debt has been transferred to a collection agency, and I’ve been paying it off for quite some time, but the amount remains the same.

If you’ve had a similar case, this article is for you, as we’ll try to systematically and briefly clarify the main points and rights of consumers regarding online consumer loans. Online loans are subject to the Distance Financial Services Act, the Electronic Document and Electronic Certification Services Act. Regarding online loans, borrowers are consumers, and therefore all protections provided by the Consumer Protection Act and the Consumer Credit Act fully apply to them.

According to Article 10, paragraph 1 of the Distance Financial Services Act, before the consumer is bound by an offer or contract for the provision of financial services at a distance, the supplier must timely inform them of all the terms of the contract for the provision of financial services at a distance and provide them with the information under Article 8 and Article 9 on paper or another durable medium accessible to the consumer. According to Article 18, paragraph 1 of the Distance Financial Services Act, in contracts for the provision of financial services at a distance, the supplier must prove that they have fulfilled their obligations to provide information to the consumer, complied with the deadlines provided for in the Distance Financial Services Act, obtained the consumer’s consent to conclude the contract and, if necessary, for its performance during the period when the consumer has the right to withdraw from the contract concluded; and that electronic messages meeting the requirements of the Electronic Document and Electronic Certification Services Act have been exchanged between the parties.

Often, companies providing online loans do not meet these conditions, and consumers are not familiar with the terms under which they will repay the loan. In the contractual clauses of such loans, extremely high penalties are usually included, which in essence are negligible in most cases. Also, in such credit agreements, there are often various fees such as “fee for the costs of collecting overdue receivables,” “fee for expert review of a request for a loan,” “fee for the activities of an employee,” and many others.

Negotiating such fees in the loan agreement contradicts the law and good morals. Such clauses contradict the creditor’s obligation to assess the consumer’s creditworthiness before granting a loan. Therefore, clauses in the loan agreement that stipulate such fees are contrary to good morals, and charging a monetary obligation related to them constitutes an abuse by the creditor.

Fees for the provision and collection of the loan are by their nature such as to fall under the prohibition of the Consumer Credit Act on requiring the creditor to pay fees and commissions for actions related to the appropriation and management of the loan.

In a subsequent article, the question of the relationship between collection agencies and the consumer (user) of the online loan will be addressed.

Материалът Rights of Consumers Regarding Online Consumer Loans е публикуван за пръв път на Legal Shield.

With Directive (EU) 2019/771 of the European Parliament and of the Council on certain aspects concerning contracts for the sale of goods, hereinafter referred to as the “Directive,” European legislators have established additional requirements for traders in the sale of goods and harmonized consumer protection measures. These rules apply both to in-person sales and online sales of goods. According to Article 24 of the Directive, Member States are obligated to transpose it into their domestic legislation by January 1, 2022. Bulgarian legislation has transposed the directive through the Law on the Provision of Digital Content and Digital Services and for the Sale of Goods, which has been in force since January 1, 2022. With the entry into force of the Law on the Provision of Digital Content and Digital Services and for the Sale of Goods, several provisions of the Consumer Protection Act that applied until January 1, 2022, have been repealed.

First and foremost, it is important to clarify what the term “goods” exactly means. According to Article 2, subparagraph 2 of the Directive, “goods” means: a) all movable material goods; water, gas, and electricity are considered goods within the meaning of this Directive when offered for sale, in limited volume or a specific quantity; b) all movable material goods that include or are interconnected with digital content or a digital service in such a way that the lack of digital content or a digital service would prevent the goods from performing their functions (hereinafter referred to as “goods with digital elements”).

Requirements for Goods:

Article 5 of the Directive specifies a fundamental requirement for sellers of goods, and these goods must comply with individual conformity requirements, general conformity requirements, and requirements for the installation of goods.

A) Individual Conformity Requirements for Goods:

To comply with the sales contract, goods must have a description, type, quantity, and quality and possess functionality, compatibility, operational compatibility, and other characteristics required by the sales contract. Goods should be suitable for the specific purpose for which the consumer needs them, which the consumer has informed the seller of at the latest at the time of concluding the contract and to which the seller has agreed. Goods must be delivered with all accessories and instructions, including installation, as agreed in the sales contract, and must be updated according to the agreed terms in the sales contract. Of course, installation requirements concern goods that have such functionality.

B) General Conformity Requirements for Goods:

General conformity requirements for goods are applied in conjunction with those for individual requirements, and goods must:

• Be suitable for the purposes for which goods of the same kind are usually used;
• When applicable, be of high quality and comply with the description of the sample or model that the seller has made available to the consumer before concluding the contract;
• When applicable, be provided with the relevant accessories, including packaging, installation instructions, or other instructions;
• Be in the quantity and possess the qualities and other characteristics, including durability, functionality, compatibility, and safety, that are customary for goods of the same kind, and that the consumer can reasonably expect given the nature of the goods and any public statements made by the seller or on their behalf, or by other persons in the pre-contractual stage of the transaction, including the manufacturer, especially in advertising or labeling.

C) Improper Installation of Goods

Any non-conformity resulting from the improper installation of goods is considered a non-conformity of the goods if:

• The installation is part of the sales contract and is carried out by the seller or by a person whose actions the seller is responsible for; or
• The installation, which was supposed to be carried out by the consumer, is performed by the consumer, and the improper installation is due to deficiencies in the installation instructions provided by the seller or, in the case of goods with digital elements, provided by the seller or the provider of digital content or digital service.

Article 10 of the Directive regulates the liability of the seller. Paragraph 1 of the same article provides the general formulation of the seller’s liability, which is for any non-conformity that exists at the time the goods are delivered and which manifests within two years from that moment.

Article 11 introduces a rebuttable presumption of non-conformity of the goods. This presumption applies for a period of one year from the delivery of the goods. This means that if a non-conformity manifests within one year of delivery, it is presumed to have existed at the time of delivery of the goods, unless proven otherwise or if this presumption is incompatible with the nature of the goods or the nature of the non-conformity. In other words, the consumer does not need to prove the cause of the non-conformity, but it still needs to be established. The burden of proving that the non-conformity is insignificant lies with the seller, unless the seller proves otherwise.

Article 13 of the Directive specifies the legal remedies available to the consumer. The consumer may request the goods to be brought into conformity with the contract or to receive a proportionate price reduction or to terminate the contract. Bringing the goods into conformity is done at the consumer’s choice between repair and replacement, unless the chosen remedy is impossible or, compared to the other remedy, would lead to disproportionately high costs for the seller, taking into account all circumstances, including:

• The value the goods would have if there were no non-conformity;
• The significance of the non-conformity; and
• The possibility of using the other remedy without significant inconvenience to the consumer. The seller may refuse to bring the goods into conformity with the contract if repair or replacement is impossible or would lead to disproportionately high costs for them, taking into account all circumstances.

The same article specifies the conditions under which the consumer may request a proportionate reduction in the price or terminate the contract. An important feature is that the consumer does not have the right to terminate the contract if the non-conformity is minor. The burden of proving that the non-conformity is minor lies with the seller.

Article 14 specifies the conditions under which repair or replacement is carried out. Article 15 specifies the requirement for a proportionate reduction in the price, and Article 16 specifies the conditions under which the consumer may terminate the contract and demand a refund. Article 17 specifies the conditions for commercial guarantees for goods, which replace those in the Consumer Protection Act.

Article 18 regulates the seller’s right to recourse. This means that if the seller is liable to the consumer for non-conformity due to action or inaction, including failure to provide updates for goods with digital elements, by a person in the pre-contractual stage of the transaction, the seller has the right to use legal remedies against the responsible person or persons in the chain of transactions. In other words, traders can engage the liability of their supplier for the goods they sold to the consumer and which have shown non-conformity.

Материалът Some Aspects of Online Sales of Goods е публикуван за пръв път на Legal Shield.

In recent years, online platforms have become a means of trade and easier access to consumers. This has created new markets and intensified competition among online merchants. There are numerous online platforms through which online merchants offer their goods and services, such as Ebay, Amazon, Etsy, OLX, eMag, and others. These platforms allow the registration of a so-called “business account” or “merchant account,” through which registered individuals can offer and sell their goods and/or services to the users of these online platforms. As a result, many online merchants register accounts and conduct trade on these online platforms.

In this created online trading environment, an important question arises: What is the protection of the rights of online merchants on these online platforms?

Online platforms administer and maintain the created online trading environment and monitor violations by both users and online merchants. Online platforms can restrict a particular online merchant from offering goods and/or services, or even suspend their activity, such as by deleting the merchant’s account or through other means. They also determine whose goods/services are promoted higher or lower in rankings compared to other online merchants. Online platforms can also specify which goods/services an online merchant can offer or prohibit a specific online merchant from offering certain goods/services. For these various reasons, European legislation has adopted Regulation (EU) 2019/1150 of the European Parliament and of the Council to promote fairness and transparency for business users of online intermediation services. This regulation sets out obligations for online platforms or so-called “online intermediation service providers,” as well as rights for online merchants or so-called “business users.”

The primary obligation of online platforms under the regulation is to establish and approve “Terms and Conditions,” which regulate the conditions for suspension, termination, or imposition of other types of restrictions, in whole or in part, on the provision of services by online merchants. Conditions for the ranking of online merchants, differential treatment, and access to the internal complaint resolution system should also be addressed. The Terms and Conditions must be easily accessible to the online merchant so that they can familiarize themselves with them at any given time. The Terms and Conditions constitute a contract concluded between the provider of online intermediation services (the online platform) and the business user (the online merchant). This contract is entered into by the online merchant’s acceptance of the Terms and Conditions during the registration of their account on the online platform. The online merchant should carefully review these Terms and Conditions, as they govern the conditions under which goods/services should be offered.

The regulation introduces a fundamental obligation for online platforms to establish an internal complaint-handling system for complaints submitted by online merchants. This system allows online merchants to file complaints when they believe there is any of the following:

• Presumed non-compliance by the online platform with any of the obligations under the regulation.
• Technological problems directly related to the provision of services on the online platform, resulting in consequences for the online merchant.
• Measures or behavior of the online platform (the provider of online intermediation services) directly related to the services provided on the online platform and resulting in consequences for the online merchant.

Online merchants can use this procedure to submit their complaints to the administrator of the online platform.

Another introduction in the regulation is the institution of mediation. Online platforms are required in their Terms and Conditions to specify two or more mediators regarding dispute resolution between the online platform and the online merchant. The regulation sets out the procedure applicable to raising a dispute.

One of the main innovations in the regulation is the possibility for online merchants to be represented by non-profit legal entities. This means that online merchants can create their organization to represent them before online platforms and bring disputes affecting multiple online merchants to court. This right is particularly important as it allows for the resolution of disputes affecting multiple online merchants. The regulation sets out the conditions for registering such an organization. It is important to note, however, that according to Article 14, paragraph 9 of the regulation, the right of online merchants to bring a dispute through their organization to court does not affect the right of each online merchant individually to bring claims before the competent national courts for any non-compliance by online platforms.

Материалът Protection of the rights of online merchants trading through online platforms (Ebay, Amazon, Etsy, OLX, Emag, and others) е публикуван за пръв път на Legal Shield.