PEFIN is a database managed by Serasa-Experian that centralizes credit information of individuals and corporations. In this article, we will explain how this system works and give an overview of the credit information market in Brazil.
Whenever people or companies purchase on credit or apply for credit loans, the credit grantors (stores, financial institutions etc), need to check if that person or company have a debtor background in order to trust them, right?
In Brazil, that service is mostly provided by private companies. It works like this: the person or company that took a default will add the name and CPF (or CNPJ in case it's a company) of the debtor in a credit information database, through an agreement with specialized companies. Once inscribed, the individual or company in debt will only be able to clean their names after paying what they own. Or else, their names will be there for any other credit grantor to see.
A bad credit record makes everything difficult to the debtor. The person or company cannot apply for credit, open bank accounts, purchase, rent a house or a car, acquire assets etc. The credit grantors include the debtor’s name in the database as a first step towards the enforcement of the debt.
The credit information companies only have the power to include and exclude names of their lists. And they make good money out of it. These companies have grown steadily and gained the confidence of credit grantors in Brazil and abroad. So, any institution that provides credit or sells on credit will consult their databases before approving the transactions.
Companies wanting to consult credit information can sign a contract with a specialized company to be a participant. Then, the user will pay for each consult they make and for each name they include on the debtors list. Excluding names from these lists is also chargeable. To give an idea, in a simple arrangement, 12 consults of names currently cost BRL 200. However, the credit information companies have special agreements to large consumers of their products.
But why doesn't the government interfere on this process? Simple, because the government will only interfere in debts that concern to it, what does not include debts from private operations. Now, when it comes to tax debts, for example, the government has several tools to avoid it and enforce the payment, including their own modern databases listing the debtors.
The government has some reliable databases of credit information, such as the CCF that gathers data about issuers of bad checks; the SCR, from Central Bank of Brazil, which makes analysis of credit risk, and CADIN that files names of tax debtors.
About Serasa Experian
As we have seen, in Brazil, the credit protection service is mostly provided by private institutions, which are companies that operate specifically in this sector, such as Serasa Experian. Currently the largest company in this sector, Serasa was created by banks and other financial institutions in 1968, with the aim of centralizing credit information of individuals and companies, reducing the margin of errors and decreasing administrative costs.
Serasa’s systems archive registers of companies and citizens and information indicating debts, lawsuits, bad checks, and other records from public and private sources. The information is given to banks, trade shops, small, medium and large companies. The company owns one of the largest databases in the world and operates nationally and internationally, through agreements with businesses from all continents.
Serasa was created unpretentiously, as a cooperative action among private banks, and started really small. With time, the company revealed itself as a very lucrative business, especially in a country where the demand for credit both among consumers and among enterprises is growing exponentially.
Much of Serasa’s development, especially in the last decade, is due to strategies focusing on small and medium enterprises, with the offer of credit information for low prices. In 2007, the company was bought by the Irish group Experian, and enhanced even more its modernizing process.
Serasa is recognized by the Consumer Protection Code as an entity of public nature. Because of that, Serasa’s activities are regulated by law, and the company is obliged to open its information to all citizens and act with transparency. However, they are allowed to charge for these consults.
Even though Serasa-Experian is the number one credit information company, there are other reliable private institutions that provide these services, such as SPC and SPCP.
PEFIN is the system managed by Serasa-Experian that centralizes credit information with national coverage, forming a database with records of unpaid debts of individuals and companies. It counts with more than 400.000 registered users and provides more than 4 million consults of records per day.
PEFIN was developed especially for small businesses that use more intensively checks, including predated, as an instrument of credit, to boost sales. In addition to providing data for the location of the indebted consumers, the system also enables the communication with the debtor, through a letter-statement, which states about the debt and gives guidelines to the payment. This communication may also include a banking billet to facilitate and stimulate the discharge of the debt.
The data stored in PEFIN are available as one of Serasa’s products and will be granted to associated credit grantors that need to use this information to subsidize their credit decisions or to conduct their businesses. Companies of all segments are allowed to participate of PEFIN (financial, commerce, industry, services institutions). The only requirements are: to have an appropriate level of computerization, as well as an effective and agile control system on their accounts.
How does PEFIN work?
Serasa Experian sends a letter to the address of the consumer informing the existence of an unpaid debt, the amount of the debt, the date the contract was signed with the shop or financial institution and the contact details with that institution. This letter works as an alert to the debtor about the need to contact the creditor within 10 days of receipt of the correspondence, to negotiate the payment.
Besides warning the consumer, it is possible to charge the debt in the same correspondence. In this case, the document is sent a letter docket: correspondence that includes a billet charging. This document facilitates and encourages the customer to settle the debt. The bank bill sent follows the standard format and can be paid Febraban across the network or internet banking.