Debt Default Around the World: Differences, Similarities, and Curiosities

Debt default is a global practice impacting consumers’ financial lives in various ways. However, the rules, reach, and management vary greatly across countries. In some countries, private agencies manage credit records, while in others, governments take responsibility. In Brazil, debt default is managed mainly by private companies, each with a remarkable history in building the credit sector. Here’s how debt default works in different countries, including unique aspects of each system.

Key Default Companies Operating in Brazil and Their Histories

1. Serasa Experian Founded in 1968, Serasa began as a partnership among major Brazilian banks to manage credit data and reduce default risks. In 2007, British company Experian acquired Serasa, bringing new technologies and expanding its services. Experian, founded in 1980, focuses on credit analysis and solutions for the financial sector. This merger between Serasa and Experian strengthened credit analysis in Brazil, establishing the company as one of Latin America’s largest.
2. Equifax Founded in 1899 in the United States, Equifax is one of the global pioneers in the credit sector. It entered Brazil in the 1990s but ended its operations in the early 2000s due to local competition. In 2021, Equifax returned to Brazil by acquiring Boa Vista Servi?os (BVS), and by 2023, it completed the acquisition, officially marking its return to the Brazilian market with a solid client base.
3. Quod is a more recent initiative, launched in 2017 as a joint venture between five of Brazil’s largest banks: Banco do Brasil, Bradesco, Caixa Econ?mica Federal, Itaú Unibanco, and Santander. Created to operate within the Positive Credit Registry, Quod aims to provide a more comprehensive credit history and lower loan costs in Brazil, including consumers who previously lacked access to traditional financial services.

How Debt Default Works in Different Countries

1. Brazil In Brazil, besides Serasa Experian and Equifax, Quod and SPC Brasil are key players in managing credit records. These companies keep default records accessible to banks, retailers, and telecom companies. The Central Bank oversees the Credit Information System (SCR) to monitor systemic risk, but it is not open to the public nor used for default purposes.
2. United States Three major private companies—Equifax, Experian, and TransUnion—dominate the credit market. They maintain consumers' default records and determine credit scores, impacting access to loans and services. In cases of unpaid child support over $2,500, the Department of State can block passport issuance.
3. Canada Similar to the U.S., credit history in Canada is managed by Equifax and TransUnion. Unpaid traffic fines may prevent license renewal, but benefits aren’t typically affected by credit issues.
4. Mexico Buró de Crédito and Círculo de Crédito, private agencies, monitor default records and provide credit data to banks and retailers. The government regulates this sector to ensure compliance with data protection and fair credit practices.
5. Argentina The Central Bank of Argentina (BCRA) manages public default records, while private companies such as Veraz (an Equifax division) and Nosis also track credit records. The impact is mainly on credit and private services, without directly affecting public services.
6. Colombia Colombia’s credit market is regulated by the Financial Superintendency, while private agencies like Datacrédito and CIFIN track defaults. Defaults affect credit and private contracts, but not direct access to public benefits.
7. Russia The Central Bank of Russia oversees the credit sector and coordinates with agencies like NBKI to manage consumer credit records. Child support debts and significant fines can block passport issuance.
8. China In China, the People’s Bank of China operates the Credit Reference Center for default records. Additionally, the Social Credit System scores citizens' financial and social behavior, potentially restricting travel and access to services for those with unpaid debts.
9. Singapore The Credit Bureau Singapore (CBS), a private entity, manages credit records. Though credit history doesn’t affect social benefits directly, negative records can limit access to public housing plans.
10. South Korea South Korea’s credit sector is regulated by the Bank of Korea, in partnership with private companies like Korea Credit Information Services (KCIS), which manages default records. Tax debts can affect passport issuance, but credit history generally does not interfere with social benefits.
11. Italy Debt default is managed by companies such as CRIF and Cerved, while the Bank of Italy maintains centralized risk records. Default records affect credit and private contracts but do not directly impact social benefits.
12. Portugal The Bank of Portugal administers the Credit Responsibilities Center (CRC), but agencies like Experian also operate in the private sector. Debt default affects access to credit and financing, while social benefits remain unchanged.
13. Spain Credit history is managed by private agencies such as ASNEF and RAI, which track default records and restrictions. A negative credit history mainly impacts credit and private contracts but does not interfere with public benefits.

Interesting Facts about the Impact of Debt Default

• Passports and Driver's Licenses: Most countries do not restrict passports or driver’s licenses due to debt defaults. However, in the United States, unpaid child support can block passport issuance, while in China and Russia, the social credit system and specific debts may limit international travel.
• Social Benefits: Social benefits and essential public services are generally accessible regardless of credit history. However, in China, the social credit system can impact access to subsidized programs, and in some countries, public housing plans may require a positive credit history.

Conclusion

While debt default rules vary widely across the globe, each system reflects the economic and cultural context of the country. In many places, the impact remains confined to the private sector. However, in some countries, like China and Russia, credit history can have broader social implications and even restrict access to services. Understanding these differences is essential for those planning to relocate or expand their business, ensuring a smooth transition and informed financial planning.