According to Natália Nunes, coordinator of Deco’s Financial Protection Office, the balance of the year is not positive: “The number of requests for help [to the Deco consumer protection association] did not decrease in 2019, remaining the same since 2017,” and totalling 29,154 last year, when in 2018 it was 29,350 and in 2017 it had been 29,000.
What changed, analysing data from that office from 2019 to 2018, were the reasons for this over-indebtedness, with unemployment no longer being the main cause of families’ financial difficulties, but being replaced by the deterioration of working conditions, such as late payment of wages, loss of income (namely due to sick leave) and reduction of overtime or commissions.
Deco recalled that the unemployed who returned to the labour market last year have been confronted with temporary and/or partial contracts and that, from a financial point of view, this situation leads to insecurity and instability and is associated with low wages.
“Regarding credits, we see that families still have five credits (one for housing, two personal and two credit cards), as in 2018, but we see an increase in the amounts of personal credit and credit cards,” said Natália Nunes.
The average amount of credit, which in 2018 was €16.111 for personal credit and €7.580 for credit cards, rose last year to €22,000 and €8.300 respectively.
In percentage terms, housing loans had a 73 percent weight in total credit, personal credit 20 percent and credit cards 7 percent.
The data revealed another major cause for concern for the consumer protection association, the effort rate borne by over-indebted consumers, or the percentage of total household income earmarked for the payment of credit instalments, which last year was 76 percent.
Natália Nunes pointed out that the effort rate should not exceed 35 percent of income, which means that monthly credit spending should absorb no more than 35 percent of the family’s monthly income.
On 1 July 2018, new rules of the Banco de Portugal (BdP) came into force restricting the granting of new loans for housing and consumption, establishing three types of limits, recommending the entity to grant new loans only to customers who spend a maximum of half (50 percent) of their net income on the monthly instalments of all loans held (housing and consumption), although there are exceptions.
“These measures had some effect on the granting of credit for housing, with the banks acting according to the recommendations of the BdP. But there is a lot to do,” she said, adding that among the requests for help that come to Deco there is a lot of credit recently contracted by families whose rate of effort no longer allowed them to have more credit.
Deco advocated creating very strict rules for the granting of credit cards and applying the recommendations to the granting of consumer credit.
The association’s data showed that the majority (44 percent) of consumers asking Deco for help were workers in the private sector (against 14 percent in the public sector), 19 percent were unemployed and another 19 percent retired.