Digital Lenders Fail to Deliver Financial Inclusion in Brazil, Leaving Borrowers with Crushing Debt
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New digital banks in Brazil promised financial inclusion but left some borrowers worse off, like a teacher paying 455% interest on her credit card debt.
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High interest rates are common in Brazil due to high inflation, lack of regulation, and limited competition among banks.
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A third of Brazilians have defaulted on debts, exacerbating an existing consumer debt crisis with disastrous consequences.
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The government is trying to address the problem by capping rates and helping people renegotiate debts, but has little power over banks.
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Analysts say lenders' methods for calculating rates are out of step with reality, as they treat all borrowers as high-risk despite high profits.