Aaah but in Mexico exactly the same thing happens: you can basically ignore Buro/Circulo de Credito and after 6 years by law they have to drop any unpaid debt report.
I worked in a Mexican credit startup 10 years ago and one of the main issues we dealt with was just that: there is no legal mechanism for a lender to recover the money they borrow. Not paying a loan is not illegal. And people in Mexico have 0 financial education .
So you have to include your default rates as part of your lending model. 30% default first loan. 15%-20% default mixed 2nd+ loan .
That in addition to a base bond rate of 10% (you can lend your money to the Mexican government for an extremely secure 10% interest) is what makes credit in Mexico Soooo expensive.
I have a friend who is lawyer and used to work in the enforcement area if Scotiabank mortgages . The stories he tells about people that just decided not to pay their mortgages but had 4 or 5 Harley Davidsons in their houses when they went to evict them... among other crazier stories.
I worked in a Mexican credit startup 10 years ago and one of the main issues we dealt with was just that: there is no legal mechanism for a lender to recover the money they borrow. Not paying a loan is not illegal. And people in Mexico have 0 financial education .
So you have to include your default rates as part of your lending model. 30% default first loan. 15%-20% default mixed 2nd+ loan .
That in addition to a base bond rate of 10% (you can lend your money to the Mexican government for an extremely secure 10% interest) is what makes credit in Mexico Soooo expensive.
I have a friend who is lawyer and used to work in the enforcement area if Scotiabank mortgages . The stories he tells about people that just decided not to pay their mortgages but had 4 or 5 Harley Davidsons in their houses when they went to evict them... among other crazier stories.