Sharks in Sheep’s Clothing: Modalities of Predatory and Illegal Lending in Bulgaria

Abstract

The economic downturn in 2009 led to a revival of illegal and predatory lending in Bulgaria, as many households and businesses were struggling to make ends meet and turned to shadow financiers. Cases of victimised usury clients increased, as well as the use of coercive, at times violent, debt collection methods associated with the activity. This is hardly surprising as illegal and predatory lending practices in Bulgaria have long been associated with organised criminal groups branching out into a lucrative and growing usury market. A recently emerged trend is resourceful criminal organisations, facilitated by loose financial regulations, legitimising their lending practices by operating on the legal market as financial lending institutions with local to regional coverage, but still keeping their predatory lending business model. In order to explain the resurgence of predatory and illegal lending in Bulgaria, this chapter will analyse in detail the overall context that enabled the proliferation of usury activities in recent years, the different modalities of usury ranging from entirely illegal lending to legal-like predatory practices, the role and involvement of organised crime, as well as the financial aspects of usury activities. This chapter draws on data from a number of in-depth interviews with law enforcement officers, experts and convicted offenders carried out in the course of 2014.