In downtown Rio de Janeiro, hungry people lining up at food banks are reportedly being aggressively sold payroll deduction loans leveraged against Auxílio Brasil welfare benefits.
Historian Denise de Sordi, a researcher of wealth distribution policies at the University of São Paulo and the Oswaldo Cruz Foundation, has witnessed the aggressive practice in poor neighborhoods since May and will report her findings in academic papers to be published in the coming months.
Even without a fixed address or monthly income, impoverished people can receive credit if they are beneficiaries of Auxílio Brasil, the Brazilian government’s cash-transfer program for the country’s most vulnerable population.
Between April and October, Ms. Sordi conducted fieldwork visiting the food banks. She said it was “highly immoral to put people in extreme need in debt traps that would make it harder for them to leave the streets one day.”
“Finance agents are always circulating in the lines with signs offering loans, and everyone wants them. There was even a riot in front of one company because they did not release credit they had promised to,” she says.
Loans can reach just over BRL 2,000 (USD 376) and repayments are taken directly from welfare benefit checks over a period of up to 24 months. “It’s a low amount, but it makes a difference for people who need to rent a small room, to buy some medicine, or food,” says the researcher.
According to Ms. Sordi, the approaches at food banks, homeless shelters, and hostels began in May, months before the federal government announced that public bank Caixa would offer payroll deduction loans to Auxílio Brasil beneficiaries.
Only five out of ten homeless Brazilians are actually registered with the government’s social benefits system, largely because of their lack of ID and other necessary documentation.
In October, The Brazilian Report revealed that data on Auxílio Brasil beneficiaries was leaked to financial institutions that offer payroll deduction loans. The practice is illegal, as it violates privacy legislation and the loan program’s own rules, which prohibit active selling.
In the lead up to the October election, far-right President Jair Bolsonaro included 7.5 million new families in the Auxílio Brasil program and made the payroll deduction loan scheme a highlight of his campaign material. He was accused of abusing the state apparatus to seek to curry favor among poorer citizens.
Caixa suspended payroll deduction loans to Auxílio Brasil beneficiaries on October 31, the day after Mr. Bolsonaro lost the presidential race. They will resume next week. According to the institution, the interruption occurred for data processing reasons.
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