Monday 25 September 2023

International list is key to avoid the arrival of lenders “loansharks” persecuted in other countries

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23 September 2023 - At The Banks - Source: BCCR

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QCOSTARICA ( Stopping the arrival of people dedicated to “loan sharking” (gota a gota loans) became a challenge for  Costa Rican authorities, especially after the tightening of measures that other countries in the region have been taking.

Weeks ago, the President of El Salvador, Nayib Bukele, gave a grace period for the suspects to flee the country.

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“The clock is ticking, all the fake ‘tourists,’ members of this extortion and money laundering structure, take advantage and get out of our country quickly. Afterward, we will not hear regrets,” Bukele wrote on social networks.

The persecution was reinforced by Guatemala as well, prompting heightened caution in that country.

Part of the measures have included a reinforcement of border surveillance, including illegal crossing points.

Costa Rica’s Minister of Security, Mario Zamora, highlighted that coordination with other governments has been required to map suspicious persons.

“We have shared names of people who are suspected of participating in this type of practice. This international alert is active today in our immigration system,” he pointed out.

“We are rejecting anyone who intends to enter the country with suspicions of this practice, and/or criminal network,” he added.

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Speaking before legislators, Minister Zamora explained that “loan sharking” is one of the main threats to national security, further explaining that in the reviews of security strategies, it revealed a particular pattern of violence that had shifted from drug dealing to contract killings.

“When we began to study the phenomenon of sicarios (hit men), we began to observe that some of the victims are executed for not paying this type of loan,” he explained.

The lending scheme has been clouded not only by the interest issue but also by the collection pattern. This includes violent tactics of threats or direct attacks, as well as complications to pay off debts.

Financial exclusion

The phenomenon of “gota a gota ” in Costa Rica has been aggravated by the financial exclusion brought about by the so-called “Usury Law”, promoted in the previous government mainly by former legislators Welmer Ramos (PAC) and David Gourzong (PLN).

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Read more: “Usury Law” has left the country more vulnerable to loan sharks, a key factor in insecurity

The reform imposed artificial caps on interest rates and thereby excluded thousands of people from the formal banking system. These people, however, continue to have needs, which is why they were forced to resort to the parallel path, with all the risks it entails.

“A significant number of people are unable to access credit through the formal system and unfortunately this exposes them to this type of situation,” Zamora said.

Various experts and organizations such as the Asociación Costarricense de Microfinanzas (Ascomi) – Costa Rican Microfinance Association and the Oficina del Consumidor Financiero (OCF) – Office of the Financial Consumer –  agree on this assessment.

At present, there is a requirement for legal reform to control illegal loans and collection abuses. There are four bills that have been presented to Congress in order to achieve this goal.

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