Families indebtedness is concerned: Consumer Defense will deal with serious cases

Given the growth of debt growth in the most vulnerable sectors of society, above all, to pay daily expenses and in the face of worrying data that reflects that this debt is usually paid off with more debt, that is, requesting new loans, the Consumer Defense Directorate approved a Regulation of Action for the Prevention and Solution of Over-indebtedness of Consumers.

According to Resolution 11/2023, published this Friday in the Official Gazette, the regulation provides the guidelines to address individual or collective cases of over-indebtedness originated in any activity or operation of offer or commercialization of products or services of credit, financing or refinancing, destined to consumers.

And it becomes clear that, when the situation of over-indebtedness compromises or could compromise the satisfaction of the daily needs of people to maintain or access decent living conditions for themselves or the family group, or when it affects people with aggravated vulnerability, urgent measures and procedures will be adopted to provide an effective and adequate response to the particulars of the case.

The Directorate of Consumer Defense and Consumer Arbitration shall lend technical advice specifically for the treatment of problems of over-indebtedness and facilitate the arrival of conciliation agreements that respect in the best possible way the rights of the indebted. Likewise, it will work to generate databases and statistics for the diagnosis and monitoring of the activity of credit or financing providers and other subjects reached, the level of indebtedness of people and their family group, the litigation rates by provider and product or service.

And, on the other hand, it will summon the credit or financing providers and other obligated subjects or the entities that represent them to establish actions aimed at preventing and solving situations of over-indebtedness and reversing practices or conduct that may be contrary to the rights of consumers.

Pay off debt with more debt and cover basic expenses

The initiative is in line with the recommendations of the United Nations (UN) and responds to the data revealed by the “Study on indebtedness of families in popular urban sectors”, carried out at the request of the Ministry of Social Development and by the National University of San Martín, which revealed that urban Argentine households that took out some type of credit in the last three months between 2003 and 2019 rose uninterruptedly from 35% to close to 62%as could be revealed from the Permanent Household Survey (EPH) of the National Institute of Statistics and Censuses (INDEC).

Likewise, a substantial modification was noticed in the forms of access to basic rights, such as housing, health, education and even food, and it was evidenced that the loans, in a large percentage, are to pay daily expenses (around 70% of households requested to pay for food and medicine), to maintain the home (50% of the households used the borrowed money to pay taxes, services and expenses, around 32% did so to pay the rent), to pay previous debts (50% of households allocate the request for money to pay trust debts and other loans, 45% do so to pay credit card debts), home or car repair expenses (30%) and to pay installments college and prepaid (28%).

The low income households they are more likely to allocate the borrowed money to food and health expenses (more than 75%) and when these households are headed by women, this percentage grows (80%).

A big problem is that, among the debt payment strategies assumed by the studied population, a very frequent way of paying off financial obligations is the generation of a debt spiral. Which are fed back in their formal and informal formats and assume multiple directions and overlaps.