Rise Of Consumer Credit In Chile And Brazil Leads To Big Debts And Lender Abuses

[interestrateripoff]

http://www.nytimes.com/2011/07/24/business/global/abuses-by-credit-issuers-in-chile-and-brazil-snare-consumers.html?_r=1&ref=business

SANTIAGO, Chile — For Ana María Silva, what began as purchases of perfume and two pairs of shoes spiraled into a credit card nightmare, as her debt multiplied tenfold in five years — and not all because of her spending.

Ms. Silva was among 418,000 clients in Chile who fell behind on their payments and had their debts repackaged by the retailer La Polar, which raised interest rates and extended loan terms without their knowledge. In early June, it came to light that executives at La Polar had been unilaterally renegotiating clients’ debts for more than six years. The news stunned Chileans and has become one of the biggest financial scandals of Chile’s 20-year economic boom.

“I share blame in this, but this company should have been more honorable and transparent,” said Ms. Silva, 30. “They were targeting people with more modest means. This became a vicious cycle that was never going to end.”

The scandal has underscored how South American countries — including Chile and Brazil, two of the region’s healthiest economies — are going through growing pains as the use of credit grows. The credit-fueled spending has driven extensive economic growth. But it has also opened the door to abuses, as credit issuers have used predatory techniques to lure customers, particularly young and less affluent ones, in countries where regulation is scant, annual interest charges can top 220 percent and consumers cannot seek bankruptcy protection, economists and consumer defense groups say.

Nice, still these economies are booming. I mean it's unlikely to end in fiscal drag is it?

[Reck B]

They might as well have a massive credit boom.

There are no cosequences after all.