Debt in Ecuador: The middle class with consumer loans is the hardest hit

The main cause of Ecuador’s debt is job loss and reduced income, and the hardest hit segment is the middle class with consumer loans.

This is the panorama seen by Ricardo Ibáñez, CEO and founder of Defensa Deudores, a Chilean company that provides legal solutions to people and companies with debt problems and that has been present in Ecuador since September 2022. In this first year of operation, they have served more than 4,000 people and achieved savings for its clients of almost $500,000 in negotiation processes. 64% of processed cases refer to credit card debts, 18% to mortgages, 12% to vehicles, 4% to production and 2% to consumer loans (other).

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“We understand the phenomenon of debt as something natural, it is impossible to think about a house, a vehicle, studies if they are not based on debt, what causes the problem is overindebtedness”, said Ibáñez during the conference ‘Indebtedness in Ecuador: financial education and mediation as alternative solutions ‘, which took place at the Universidad Espíritu Santo (UEES) on November 14 of this year.

At the event, the director of the Public Relations Department of the Association of Private Banks of Ecuador, Roberto Romero, emphasized financial education for the prevention of over-indebtedness, creating healthy financial habits, focusing on financial independence, understanding risks and opportunities. And the director of the Center for Arbitration and Mediation of the University of Espíritu Santo, María José Blum, referred to the importance of mediation to resolve various types of conflicts, such as debts. “Conciliation is a special form of judicial service. “It is a structured procedure that is a channel for constructive dialogue between the parties.”

Ibáñez comments more about the panorama they found in the country.

In this first year of business in Ecuador, how do you see the situation?

It is not in the human conscience that the debtor has the right to defend himself, which is the same as what happened in Chile, in 2024 we will turn 25, and the first years were the same in this same way to create awareness of the problematic.

Debt is something that happens to everyone, over-indebtedness is something you should not be ashamed of and generally the causes that lead us are absolutely involuntary situations on the part of the debtor.

In law, we find tools that allow us to face this problem in a legal way, reaching consensus and seeking agreements that allow the debtor to fulfill his obligation, often in a different state than the one in which he contracted it.

The mediation process mentions savings for your clients of nearly $500,000. How was this achieved?

What we did was we renegotiated together with them, obviously we defended hundreds of procedural actions, enforcement actions where we were able to protect our clients very well and enforce rights like the statute of limitations.

Many times the general population is not aware that obligations are subject to deadlines and consequently many times the collections carried out by creditor agents are inappropriate, this is one of the crusades that we also have through our organization, the pillars of which are to educate, inform and defend.

These are the types of debts that are regulated in Ecuador

What are the main causes of Ecuadorian debt?

The main cause of debt is related to job loss and reduced income. Today we are faced with an economy that is in crisis. We saw deep down that this is not a problem that affects Ecuador, Chile, it is a problem that affects the world, which makes us think that in this context – with even more reasons – we have to be together, the academic community, creditors and debtors, that’s why meeting at the University of the Holy Spirit.

From which segment are the most indebted?

Indebtedness at the level of gender is more or less equal, we can say that 50% falls on women and the other 50% on men. Undoubtedly, the hardest hit segment is the middle class and debts in relation to consumer loans, which is why financial education becomes very important because we understand that deep down, consumer debts often arise as a result of irresponsible borrowing without looking at certain parameters. which allow us to borrow in accordance with our actual payment capabilities.

From what date are Debt Defense debts renegotiated?

Debts that are currently due, i.e. not subject to the statute of limitations, are therefore debts that are less than five years old.

Which cities were the most contracted debts?

Our activities are concentrated mainly in Guayaquil. We are observing the same behavior as in Chile, the big problem is consumer credit debt.

There was talk of taking care of more than 4,000 people in Ecuador in this first year, what is the projection for 2024?

Growth of 25% per year, which is more or less the same aspiration we have in Santiago.

Do you have plans to expand Defense Debtors to other countries in the region?

That. We will open in Colombia in March 2024, in Brazil in December next year and in Peru also next year.