Debts

New rule aims to prevent over-indebtedness

10.14.2015

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Credit card is one of the villains of the domestic economy, responsible for the debt of almost 80% of households that are in the red

Legislative proposals

PLS 283/2012

We live in a scenario in which credit supply and false advertising to induce a type of consumption that leads families to borrow beyond necessity and reality. Given this situation, as noted by Senator Ricardo Ferraço (PMDB-ES), "it is essential to act creating an awareness and culture on mechanisms to avoid over-indebtedness".

It was with this objective that the Senate passed at the end of September, the PLS 283/2012, which deals with standards on consumer credit and on the prevention of over-indebtedness. The proposal comes from the activities of the commission of jurists who, after two years of work, proposed suggestions for the modernization and upgrade of the Consumer Protection Code (CDC), in force since 1990. The text will have to be voted on additional shift before heading to the House of Representatives.

The approved project establishing a number of mechanisms to prevent and extrajudicial and judicial treatment of excessive debt and encourages responsible lending practices, financial education and renegotiation of debts.

Among the measures proposed in the text, are the prohibition on advertising by reference to terms such as "free credit", "interest free", "without adding"; the requirement of clear and complete information about the service or product offered; the creation of the figure of "consumer harassment" when there is pressure on the consumer purchases the credit; and the creation of the conciliation, to stimulate the renegotiation of consumer debts.

- This project will demonstrate towards the people who need to take care of the debt. We already have campaign against smoking. You must campaign against the debt, which brings health hazards same - said the rapporteur.

Overindebtedness

The indebtedness is a problem that affects not only the person, but your entire family. The objective project approved strengthen information and prevention of over-indebtedness, introducing the culture of responsible credit granting and increasing the payment of debts culture as an incentive to renegotiate and organizing consumer payment plans.

The project defines as indebtedness the "commitment of more than 30% of the monthly net consumer income with the payment of all the non-professional debts due and falling due, excluding financing for home ownership for housing, and since non-existent goods free and sufficient for settlement of total liabilities. "

The main new features of the project are:

- Development of consumer financial education activities, including the issue of inclusion of suggestion in school curricula;

- Establishment of mechanisms to prevent and extrajudicial and judicial treatment of over-indebtedness, encouraging responsible lending practices, financial education and renegotiation of debts;

- Consumer information in credit agreements of the relevant data from hiring (effective interest rate, total charges, amount of benefits);

- Ban on vehicular advertising credit with the terms "interest free", "free", "without adding" with "zero" or similar meaning or understanding speech;

- Supplier duty to enlighten, advise and adequately warn consumers of the nature and credit modality offered, as well as on the general and specific consequences of default;

- The duty of the supplier to assess the consumer's condition to repay the debt, including checking whether it meets restrictions in the credit protection agencies;

- 30% limit of net monthly earnings for payroll loans;

- Establishment of a legal guarantee of two years on products and services. This means that products and services have to be provided or made to last at least two years without vices;

- Prohibiting the supplier to harass or pressure consumers, especially the elderly, illiterate, ill or in worse state of vulnerability, to hire the product supply, service or credit;

- The credit agreement correlation used to finance the purchase of a product or service to the main contract of sale. So if consumers give up the purchase and sale of the vehicle, the credit agreement will be canceled as well.

Renegotiation conciliatory

Will be created, according to the project, renegotiation process of debt conciliatory manner so that the consumer can establish a debt settlement plan jointly with creditors. They exclude, however, that the debt renegotiation process food character, fiscal and quasi-fiscal and those from intentionally contracts without the purpose of making payment.

The renegotiation process can only be repeated by the consumer after the lapse of two years, counted from the full payment of the last installment plan. The renegotiation process may be judicial or extrajudicial, through prosecutors, Defender and Procon, for example. The judge may set a payment plan if a lender accept conciliation.

The text also provides that the consumer should be informed "reference unit" in the purchase of certain products. For example, if the consumer wants to buy a soda, it is currently difficult to know which package offers the best price (cost / benefit). It is better to buy a 350 ml cans or bottles of 600 ml, 1 liter, 2 liters etc. If all products have a price per liter or per milliliter, consumers can compare and buy the cheapest.

Credit democratization

In the early 1990s, the concept of debt distress was not so fashionable in Brazil as currently. The Consumer Defense Code was sanctioned a few years before the Real Plan to stabilize the Brazilian economy. Since then, millions of Brazilians managed to increase income and entry into the labor market. Only in the last decade, more than 40 million Brazilians joined in the consumer market, which have also increased the number of debt.

The percentage of families with debts in the month of September is the highest on record this year, according Research Debt and Default Consumer (Peic), the National Confederation of Commerce (CNC). In the month, the total number of indebted households reached 63.5%, ie out of ten families, about six have some kind of debt. The number also exceeds the level registered in the same period 2014.

The credit card was appointed as one of the main types of debt for 77.9% of households, followed by booklets, with 16.8% and car financing, with 13.7%. Among indebted households, 35% said they are committed to the income in debt for more than one year and 24.7% stated that the debts are responsible for more than half of their monthly income.

Also increased in the month of September, the percentage of households with overdue debts or accounts: the rate reached 23.1% of the total, or about two out of ten families. This is the highest percentage ever achieved since July 2012. The data also show that 8.6% of households said they had no position to pay its arrears - this is the highest level recorded since June 2011.

The economist of the National Confederation of Commerce, Marianne Hanson, said the increase in debt is not being accompanied by increased consumption. According to her, there has been a reduction in retail sales, especially in relation to durable goods such as appliances, furniture and automobile financing.

Marianne Hanson, the high cost of credit with high interest rates, the rising cost of living and the least favorable scenario the labor market are the main factors that influenced the increase of indebted households and rising defaults.

- This year we observed a rapid increase in unemployment rates and income is growing below inflation. These factors together mean that families have more difficulty paying their bills on time - he said.

Testimonials

Emotional imbalance after her mother's loss. This was the starting point for Nicole Baptist *, a retired servant of the Senate, lost control of spending and endividasse. Nicole says she felt happy to buy and thought that somehow he was making up for his suffering.

The server said that broke the limits of credit cards and overdrafts on two banks that had account. To try to pay off the debt, took loan in three different financial. Later in the month, she said, the salary I could not cover neither the financial nor the loans and debt with banks. The end result of the story was the loss of his apartment, which was at auction.

- When I see, with interest, it was a snowball that could not settle anything. I had no salary to cover the provision of the apartment he had bought. Just had little to survive - reported.

Nicole recalled that, by having a high paycheck, always had offers that contributed to the debt. It was easy to get loans and limits "very high" on the cards and overdraft. To get out of the snowball, he took a payroll loan, which has paid for more than seven years.

The Rocilda Maria cleaning assistant also felt "the pinch in their pockets," but not uncontrolled. Mother of five children, Rocilda had unforeseen medical expenses when his youngest son, seven years old, became ill. The cleaning assistant was first to a public hospital, but in the absence of an on duty doctor on site, eventually had to resort to the emergence of a private hospital.

- It was 400 reais only in consultation more spending on medication and treatment. An expense that was not waiting outside my budget - said.

Tips

The key tip to avoid debt, according to financial educator Anderson Alves, is to have a standard of living where you spend less than you earn. Anderson points out that people should know your own financial profile privileging always save something at the end of the month.

Anderson notes that if there is an emergency and need to make a loan, it is essential to observe the interest rate of each mode. He said the payroll loan, to have greater security to the bank, it would be the best choice among the existing credit operations in the market today. If one must credit card or overdraft, considered the highest interest of the market, worth exchanging the debt for another lower interest rates, such as payroll loan or Direct Consumer Credit (CDC).

For overindebted that no longer have any limit, the teacher recommends a behavioral change aiming to reduce costs and increase revenue. Anderson pointed out that the debt should try to pay their demand accounts, look for other sources of income and review your standard of living and priorities involving the whole family in the process.

- Has superendividado that neither his wife know the situation. It is essential the whole family be aware of the financial life so that she can reschedule their way of dealing with money - said.

The debt renegotiation with creditors trying to reduce already incurred interest and penalties is another important action that should be taken by debtors. The main concern of creditors is to receive and, according to him, the institutions tend to be quite negotiable.

The plots, according to Anderson, may also be renegotiated to make them smaller and thus, the debt can save some money out of the situation. Anderson said the Programme for Prevention and Consumer Treatment overindebted, the Court of Justice of the Federal District (TJDFT). The project seeks to promote conciliation sessions for renegotiating debts, as well as a psychologist and financial monitoring of overindebted.

- One has to recognize that is superendividada, seek creditor institution and negotiating interest, which can be reset. The institution may withdraw up to one hundred percent of them - remarked.

Anderson Alves said that a healthy debt is the one that does not compromise more than 30% of gross income and explained that the large supply of credit and the media marketing, which requires the citizen the need to consume, are factors that contribute to the great debt in Brazil.

Source: Senate

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