Global Issues
Q&A: Wanted in Latin America: Responsible Credit
Improving access to financial services and achieving 'responsible credit' require ongoing dialogue on the part of companies, states and consumers, Juan Trímboli, regional coordinator of the Consumers International office in Latin America and the Caribbean, told IPS.
On Monday, Consumers International celebrated World Consumer Rights Day, whose theme this year is 'Our money, our rights', with activities in at least 115 countries.
Although the global economic crisis has not hit Latin America as hard as other regions, it has created a situation of over-indebtedness due to a rise in unemployment, said Trímboli, a Uruguayan who is living in the Chilean capital, where Consumer International's regional office is located.
In this interview with IPS, Trímboli complained that although various international bodies have stated that the current economic crisis has revealed the need for financial system reform, no concrete steps in that direction have been taken.
Q: What is Consumer International's assessment of access to financial services in Latin America? A: An expansion of access to credit has been seen in all countries around the world, a phenomenon that has been especially marked in Latin America. The international crisis that originated in the United States has to do precisely with the lack of regulation of financial services and the lack of social responsibility on the part of a number of banks.
In Latin America, we carried out a study last year in some members and associate members of Mercosur (Southern Common Market): Argentina, Brazil, Chile, Peru and Uruguay. We are repeating the exercise in a few countries of Central America: El Salvador, Panama and Nicaragua; and we're working in a few countries in the Andean region: Ecuador, Colombia and Venezuela.
In general terms, what we have found in these studies is that the information given to consumers with respect to the loans they are offered is generally confusing, insufficient, lacking in transparency and in many cases inaccurate.
For example, ads about loans and the conditions for obtaining or using them contain inaccuracies or fail to mention all of the information required by legislation regulating credit. Another important element is irregularities in oversight or inconsistent oversight, because we don't have proactive policies or efficient regulations in that area. On the contrary, in our countries we hear people talk about 'self-regulation' of the financial system.
There is also a glaring lack of tools for resolving problems arising from the offer and taking out of loans and problems of over-indebtedness.
We operate from the premise that access to credit and other financial instruments that enable consumers to improve their living standards is a valid objective.
We aren't questioning the existence of these mechanisms in modern societies; on the contrary, in this campaign we are pushing for the right to credit, which should be available to everyone, without discrimination.
Q: Of the five Latin American countries studied last year, where did you find the biggest problems? A: In general, the problems are similar; the differences are seen in other aspects. For example, Chile is a country where the issue of credit, indebtedness and over-indebtedness are major issues, as they are in Brazil, because of the level of development of both countries.
In Chile, retail store credit cards outnumbered bank credit cards four to one until a year and a half ago.
But problems of accurate information, advertising and lack of regulation are constants in most countries in the region.
Q: What are the key focuses in the campaign this Mar. 15 and the rest of the year? A: In the campaign for Mar. 15 this year, we are focusing on two areas. At a global level we're talking about the need for a new financial culture, new financial policies.
International bodies like ECLAC (United Nations Economic Commission for Latin America and the Caribbean) and the World Bank, as well as we ourselves, believe that the crisis has shown that the structure of the financial system does not guarantee security and can compromise the economy at an individual, family and national level.
In the case of Latin America, we're focusing on what we call responsible credit, which has to do with the actions of three actors, the state, consumers and the financial system, and with the promotion of family bankruptcy laws.
Q: What are family bankruptcy laws? A: They will actually be a major focus in the work we are carrying out. They basically have to do with the question of over-indebtedness. Today, many European countries, like Germany, Spain and Britain, have personal bankruptcy laws, which have provided good results.
In Latin America, the legislatures of Chile, El Salvador and Brazil are studying draft laws on the question.
These laws are a legal tool to enable individuals or families who have fallen into debt because of problems outside of their control to get back on their feet by means of agreements with banks or retail stores.
The various options offered by bankruptcy laws can include an extension of payment deadlines or a reduction in interest or principal payments or in the debt owed.
Bankruptcy laws not only help people overburdened with debt, but also provide greater certainty to both consumers and markets, and can help generate greater confidence.
We firmly believe that unless all the different actors involved work together, it is practically impossible to start improving access to financial services.
We need to establish an ongoing dialogue with the state and the financial system. This is not going to be solved just with our work or the efforts of civil society at large.
© Inter Press Service (2010) — All Rights Reserved. Original source: Inter Press Service