Getting out of the "Red": Debt Negotiation at a Public Debt Settlement Advice Center

People's indebtedness has increasingly been a reason for concern for several social actors from different parts of the world such as Brazil, Mexico, the United States, and France. The press, consumer protection agencies, governments, and financial institutions have been seeking "solutions" to this growing social phenomenon. Such solutions range from advice on how best to use money to state intervention with the purpose of promoting debt negotiation.

In Brazil, this phenomenon has started in the 1990s after the implementation of the Real Plan. As a result of this Plan, inflation rates became stable, unemployment levels dropped, and the government undertook initiatives to increase the income of the population. Such initiatives were especially focused on income transfer programs, resulting in the economic rise of a significant portion of Brazilians. Therefore, a new and "rich" consumer market was created. This portion of the population was eager to purchase products and services that used to be out of their reach, such as traveling abroad, owning a car and a house. Besides their increased family income, Brazilians used credit to acquire these products and services. According to Febraban (Brazilian Federation of Banks), between 2006 and 2010, there was an increase of 132.8% in the volume of credit operations, exceeding R$ 1.7 billion in loans and accounting for 46% of GDP (Gross Domestic Product).    

 If, on the one hand, credit is a tool for social and financial inclusion of part of the population (Abramovay, 2004), on the other hand, it’s growing and, sometimes, irregular expansion may cause higher indebtedness. In this context, it is important to consider the high interest rates charged by different types of credit, thus making the scenario even more complex. 

The Brazilian judicial system was one of the social actors most deeply affected by this phenomenon, especially the restorative justice, public defender's offices, and consumer protection agencies, because consumers started to seek mechanisms to negotiate their outstanding debts. Even with the lack of a specific legislation for the management of this over-indebtedness (MARQUES, 2006), one of the most important legal measures used by these institutions was filing lawsuits against credit-selling companies, asking for a revision of their interest rates. However, this type of legal resource had little or no effect for debtors. The significant increase in the number of lawsuits filed, which extended the waiting time for trial, combined with credit regulations under discussion, resulted in debt amounts even higher than those of the time the lawsuits were filed.

Therefore, in 2006, the State Court of Rio Grande do Sul, the National Council of Justice (CNJ), and other institutions focused on Consumer Law implemented the first attempts of debt settlement mediation. In 2009, these initiatives led to the establishment of the Judicial Center for Debt Settlement and Mediation.

This Center has achieved an average of 450 sessions per month and a rate of debt settlements greater than 60%. It became a public center for debt negotiation between consumers and their creditors mediated by the State, mainly focused on credit card companies and banks.

This proposal of short meetings, which was designed during the development of a doctoral dissertation defended in March 2014, is aimed at discussing the different dimensions presented during the debt negotiation process and their influence on the subjective reconfiguration of debtors. Based on an ethnographic approach conducted at the Judicial Center for Debt Settlement and Mediation in 2012/2013, we found that, in spite of involving different stories and diverse management methods, debts and their social meanings are related to moral, social, and political criteria.

In disagreement with Graeber's assumption (2011), financial debts are not "cold" and "easily solved". Debts also leave their "marks" because they include the roles played in a network of obligations (MAUSS, 2003), the fear of being perceived as deviant (BECKER, 2008), and social values (ZELIZER, 1994). These categories are perceived through social dramas (TURNER, 2013), through demonstration of anger, anguish, fear, shame, and so many other pains and emotions. These are the most visible aspects during the negotiation process.

At the same time, when they seek for legal help, these individuals show that they are aware of a code that defends them as consumers and their dignity. Therefore, they are using the notions of justice and citizenship (CARDOSO DE OLIVEIRA, 2005). 

The present proposal includes a discussion on how the Judicial Center for Debt Settlement and Mediation, as well as other social actors, has been implementing pedagogical techniques to teach consumers to achieve "control" and "financial reeducation" (FOUCAULT, 2003).