QCOSTARICA — The National Debt Survey (Encuesta Nacional de Endeudamiento) concludes that some 221,000 Costa Ricans have resorted to informal means of borrowing, obtaining quick and easy loans from loan sharks (“gota a gota lenders” in Spanish), that is not regulated, charges high interest, which can double and triple or more and typically comes with threats, if not repaid on time.
The Oficina del Consumidor Financiero (OCF) – Office of the Financial Consumer – surveyed some 1,200 people between the ages of 18 and 65, in different parts of the country, during September and October 2023.
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The survey concludes that 7.4% of the population has resorted to these loans and that 5.5% (equivalent to 181,500 people) have received threats from lenders for repayment of the high-cost interest loans and fees they impose.
According to the report, 4.4% reported having filed complaints with the judiciary for this reason.
Another calculation made by the OCF is that if each of these Costa Ricans requested a loan for ¢200,000 colones (US$381 at today’s exchange rate), for a total of ¢44 billion colones.
“The ‘gota a gota’ loan is well established in the country. If we assume a conservative disbursement amount per loan, it is valid to suspect that a fairly considerable sum has been disbursed through this type of lending,” said the general director of the OCF, Danilo Montero.
Montero pointed out that one of the objectives of studying this modality from the survey is to make this problem more palpable and “contribute to creating public policies that allow the population that resorts to these loans to have access to financial solutions within the legal framework.”
Harsher penalties being considered
Currently, a bill is making its way through the legislative process, which seeks to impose sentences of between 5 to 10 years in prison for loansharking, that is loans at unreasonably high rates of interest, higher than the legal or financial market amounts, and under conditions variable and oppressive.
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In addition, the penalties will be harsher for members of organizations dedicated to loansharking.
The bill has already been ruled on by the Security and Drug Trafficking Commission and is on the agenda in the Legislative Assembly for its due process of discussion and voting to become law.
The Organismo de Investigacion Judicial (OIJ) warns of the risk of borrowing from loan sharks and of the increase in the number of complaints of extortion and threats linked to this type of lending.
Security experts warn about the link between loansharking and organized crime and the high insecurity currently experienced in the country.
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What is an example of loansharking in Costa Rica?
Lenders will lend a relatively small sum of money with the intention of gaining high levels of interest in a short time.
Using the figures from the OCF report, a borrower would take out a loan for ¢200,000 colones, funded usually within hours or less, and with little formal credit information, at rates far above any regulated rate.
Read more: “Usury Law” has left the country more vulnerable to loan sharks, a key factor in insecurity
For example, a loan shark might require a repayment of ¢400,000 within 30 days for an initial loan of ¢200,000. Not paying on time or in full would mean additional charges, that may accumulate daily, until fully paid, and most likely would come with threats of violence to collect repayments.
The maximum rates in national currency are the highest since the cap was established with the promulgation of Law No. 9859 on June 11, 2020.
The following table indicates the evolution of the maximum interest rate (usury rate) in Costa Rica (from Delfino.cr):
For the first quarter of 2024, the maximum interest on small loans (microcréditos) is s 54.37% for loans in colones and 40.7% for loans in dollars.
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