RIO DE JANEIRO, BRAZIL – “In eight months my debt has increased more than fivefold. They even knocked on my door, causing embarrassment. There were nights when I couldn’t sleep thinking they were going to foreclose and auction off my property.”
The account is from retired banker Lindaura Luz (a fictitious name) who, in recent years has accumulated debts for secured loan, overdraft and credit cards with two of the country’s largest private banks, after losing part of her monthly income with the termination of a store lease on Avenida W3 Sul, in Brasília, which she inherited after her husband’s death.
The nightmares and the uncomfortable visit of collectors ended when Lindaura sought out the courts to force the renegotiation of debts she had with two of the largest private banks in Brazil.
The Judiciary Center for Conflict Resolution and Citizenship – Over Indebted (CEJUSC) of the Federal District Territory Court mediated meetings between creditors and the former banker. The debts were written off and repaid. Part was paid off and part is up to date.
The story of Lindaura Luz illustrates the cases of over-indebtedness in Brazil. According to a survey currently being finalized by the Central Bank (BC), there are approximately five million over-indebted people in a universe of 83 million borrowers (six percent of the total).
According to a report submitted by Central Bank experts, the risk of over-indebtedness is greater when the borrower accumulates more than one type of debt. In June 2019, according to data disclosed by the Central Bank, ten million borrowers were in arrears with their commitments.
Over nine million people had at least one type of debt. Out of this number, over-indebtedness affected more than half (55 percent) of those indebted.
The condition of over-indebtedness is not necessarily related to default rates (debt outstanding for more than 90 days). According to the Central Bank’s monetary statistics webpage, in that month the default rate for secured loans stood at 3.6 percent and for vehicle purchases at 3.3 percent.
Default on personal credit reached 7.4 percent, 14 percent on overdraft and 33.5 percent on credit card revolving interest.
Source: Agência Brasil