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Source: https://www.migalhas.com.br/

The injunctions granted in these lawsuits, which order the removal of the name from the blacklist, distort credit analysis and result in higher interest rates for consumers.

The so-called “name cleaning industry” is promoted by associations (some of which are fronts), which file class actions against credit bureaus, predominantly in the states of Piauí, Pernambuco and Paraíba, in order to suppress information on debtors' defaults and consequently increase their credit rating, without there being any proof of irregularity in the registration of these debts.

The injunctions granted in these lawsuits, which order the removal of the name from the blacklist, distort credit analysis and result in higher interest rates for consumers.

The practice of these associations, known as “predatory litigation“, has worried the Brazilian justice system because it is damaging to procedural speed and the public purse, as well as going against the consensus among legal professionals. These preach that judicialization should always be the last alternative, after all possibilities for consensual or amicable resolution have been exhausted.

The situation described as predatory judicialization by recommendation 127, published in February by the CNJ, happens thanks to the action of lawyers who file thousands of lawsuits a year, with petitions containing the same claim and cause, changing only the name of the party represented and a few other pieces of information identifying the case. The recommendation guides the courts to adopt precautionary measures and provides the CNJ with instruments to monitor and combat predatory judicialization.

The market itself is aware of this situation, which increases companies' operating costs and penalizes economic activities in general. The credit bureau sector, through the ANBC - The National Association of Credit Bureaus and other organizations have come together to fight the “name-clearing industry”.

The actions of credit bureaus and other sectors is based on a legal-economic opinion signed by Luciano Timm, a lawyer and professor at FGV-SP, and Luciana Yeung, who holds a PhD in Economics from the same teaching institution, as well as coordinating Insper's Center for Economic Analysis of Law1. The aim of this document, which was sent to the CNJ, The aim of this study is to highlight the negative effects of injunctions granted by judges on the credit market. It also shows that these decisions end up encouraging undesirable behavior, aimed at predatory and opportunistic judicialization.

Bureaus use relevant data to provide tools that support credit operations. By creating means of evaluation with information (including delinquency), the bureaus provide sanity to the credit discipline, helping creditors and benefiting consumers themselves by reducing the costs of granting credit. This dynamic prevents the risk of default from being distributed throughout the chain, thus harming those who pay their bills on time. It also protects the borrowers themselves from getting into debt beyond their capacity, as required by the Over-indebtedness Law (Law 14.181/2021), which came into force last year.

The bureaus work to reduce informational asymmetry, which is the lack of knowledge of the institutions offering credit about the borrower, especially their ability to fulfill the contract. The problem is that judicial interventions, such as the granting of injunctions in the context of the “name-clearing industry”, interfere with the quality of the information shared by the bureaus. After all, because of the injunctions granted, the bureaus are obliged to remove borrowers' data from the negative list, without them having fulfilled their obligation.

This scenario contributes to an increase in the risk of granting credit, This results in higher costs (interest) when taking out credit. “It is undisputed among analysts - from any academic and professional background - that one of the main reasons for the extremely high interest rates and spreads is the insecurity brought about by the default of a portion of customers and, more importantly, the frequent defenses that the Judiciary makes of these individuals,” write Timm and Yeung in their legal-economic opinion.

According to ICC (Cost of Credit Indicator), created by the Central Bank and which reflects the weight of interest rates in the economy, default is the main component of the spread. Considering the average values between 2018 and 2020, defaults accounted for 31.9% of the ICC spread.

Timm and Yeung conclude their opinion by saying that the more the Judiciary, or any other legal authority, makes decisions that favor the default of clients in this situation, such as granting requests for injunctions, the more it will contribute to increasing the spread in Brazil. This is the so-called “judicial factor” that has been weighing on companies' budgets and consumers' pockets for many years.