SAO PAULO, Sept 18 (Reuters) - Alice de Queiros was earning little more than Brazil's minimum wage of around $300 when Nubank NU.N, Latin America's largest digital bank, raised the limit on her credit card in 2022 far beyond what traditional lenders were offering, increasing it twentyfold over three years.
"They didn't even ask for proof that I had the income to repay it," the 30-year-old Brazilian public servant said.
With almost her entire paycheck now going to repay the $1,500 owed on her credit card, Queiros is one of millions of Brazilians caught in a digital lending boom that expanded access to credit while exposing vulnerable households to some of the world's highest borrowing costs.
A record 82% of Brazilian households are in debt, and a third are behind on their payments, according to the National Confederation of Commerce. Despite a solid job market and easing inflation, frustrated voters say the state of the economy is among their top concerns ahead of general elections in October.
In a July review, as part of its annual consultation with Brazil, the International Monetary Fund said much of the buildup in Brazil's household debt was driven by credit cards and unsecured personal loans, with fintechs and digital banks at the forefront of the lending boom.
"These institutions have increasingly targeted low-income customers," said Lauro Emilio Gonzalez Farias, a professor at Fundacao Getulio Vargas in Sao Paulo, who specializes in financial inclusion. "We have a predatory lending model."
Nubank said in a statement that it could not comment on Queiros' case because of privacy rules, adding that credit decisions take into account factors such as existing debt and the portion of a client's income committed to servicing it.
Leftist President Luiz Inacio Lula da Silva and his main right-wing challenger in this year's presidential race, Senator Flavio Bolsonaro, have proposed measures to curb household debt, including tighter rules on credit offers, though the extent to which fintech lending would be affected remains unclear.
"You can walk into virtually any retail store today, including online, and be offered a credit card on the spot," said Jose Luiz Rodrigues, chairman of ABFintechs, an industry group.
Lenders should face stricter accountability and use better technology to assess borrowers' ability to repay before extending credit, he added. "Regulators need to raise the bar."
Brazilians had an average of 6.7 banking relationships at the end of 2024, one of the highest levels globally, data from Brazil's central bank shows.
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