Unprecedented Serasa Experian survey reports record number of individuals in default

57 millionpeople have overdue debts. The number is higher than the one found in August2013. This increase is due to consumers over indebtedness and the lack ofcontrol when taking a loan 

The number of individualsin default beat the record this year. An unprecedented Serasa Experian surveyreports that 57 million Brazilians have overdue debts, and, therefore, hadtheir names included on the bad payers list. This number is higher than the onefound in August 2013, when 55 million were included on that list. On the samemonth of 2012, this number was 52 million people.

According to SerasaExperian experts, the increase of the number of individuals in default is dueto families’ increasing indebtedness situation and to consumers’ lack ofcontrol when taking new loans, disregarding monthly fixed costs and otherpreviously taken loans. Installment payment plans at high interest rates (suchas mortgages and car financing), as well as the high rates charged foroverdraft accounts and for revolving credit on credit cards are also elementsthat impact family budget and drive them to a default status. Non-bankingdebts, such as payment booklets issued by shops and debts with banks were themain factors for increased default among consumers.

The survey conducted byExperian also reports that 60% of the individuals in default have monthly billsto pay that amount to over 100% of their monthly income. In addition, 53% ofthe indebted individuals accumulate up to two unpaid debts.

While these rates are high,this is not an alarming situation. “The level of default could be higher, butthe income evolution and the low unemployment rate are mitigating thisscenario. The current scenario is a matter of concern, because it proves thatfrom the total Brazilian population in the age group of 18 years or older (144million people), about 40% is in default. But this is not an alarmingsituation, since the debt volume for most people (2) is not high. Nevertheless,this situation must be followed up with increasing attention”, said theSuperintendent of Consumer Information for Serasa Experian, Vander Nagata .

For him, population’schronic propensity to lose control must be fought with financial education. “Transformingbasic knowledge on financial education into an aware behavior, avoidingimpulsive purchases or shopping with ostentation purposes is a challenge forBrazilians, who currently spend more than earn and do not save any money,although they are aware of the importance of those behaviors.”

On the other hand, loanersdon’t have much information available for them to make a more accurateassessment of an individual’s affordability, addressing the current level ofindebtedness of each customer. “From a loaner’s perspective, there is noinformation available about customers’ real indebtedness level. Companies mustequip themselves with tools that can reduce the level of risk when grantingcredit”, warns the superintendent.

“Creditis a powerful tool for economic development, provided it is paid back. Defaultis detrimental, because it destroys value and impact citizens’ quality of life,who start to struggle with over indebtedness, and also impairs the productivechain. Companies, governments and the society should face the strong challengeof providing financial education to our consumers”, said Vander Nagata.

  Click on the link below toread Serasa Experian experts’ tips to consumers on how to reorganize theirfinances.