Brazil debt collector Recovery steps up renegotiation as defaults rise

miércoles 21 de octubre de 2015 16:19 GYT
 

SAO PAULO Oct 21 (Reuters) - Recovery do Brasil SA, Latin America's largest debt collector, is intensifying efforts to allow consumers to renegotiate their defaulted debt as climbing unemployment and a deep recession cause delinquencies to jump, an executive said on Wednesday.

The company, which is controlled by investment banking company Grupo BTG Pactual SA, is taking part in more debt settlement campaigns and increasingly relying on online renegotiation platforms to collect more debt in arrears from borrowers, said André Calabró, Recovery's director of credit recovery.

This week, Recovery and a unit of credit bureau Serasa Experian are holding a debt settlement event in São Paulo to encourage borrowers to renegotiate their debts. Similar events have resulted in the approval of more than 20,000 renegotiation deals between Recovery and individual borrowers, the company said.

According to Calabró, loans in arrears are likely to keep rising in coming months, as the Brazil's deepest recession in a quarter century, rising urban unemployment and accelerating inflation take their toll on household finances.

Brazil's economy is expected to shrink this year and next, the first back-to-back annual contractions since the 1930s, while domestic interest rates are among the world's highest. That has made it harder for factories, farmers and individuals to repay loans, increasing the number of delinquencies, unpaid utility bills and bounced checks.

In a sign of economic hardship, an increasing number of borrowers are avoiding renegotiating their liabilities upfront and are instead asking debt collection companies such as Recovery to parcel out their obligations in as many installments as possible, he said.

"There has been a decline in recoveries, although not too sharp, which is making us adjust our strategies to consumers' ability to pay their obligations," Calabró said in an interview.

Brazil's recession is quickly hitting the quality of credit card, auto and low-ticket working capital loans. Collateralized credit such as payroll or mortgage credit have performed relatively well, although signs of deterioration are showing.

Recovery oversees 50 billion reais ($12.7 billion) in distressed debt loans.

($1 = 3.9346 Brazilian reais) (Reporting by Guillermo Parra-Bernal; EDiting by Steve Orlofsky)