AS I SEE IT

By Henri Loridans

Credit - Here and There

Expatriates from the United States and Canada living in Mexico can readily see the differences in the availability and use of consumer credit in the several countries. As both a user of credit and a lawyer representing clients in financial matters, I offer the following observations.

In the United States, a consumer does not have to seek credit; it pursues him. I have represented clients in bankruptcy proceedings who showed up at the first meeting of creditors with a brand new credit card. Very often these cards were unsolicited. Ironically, many of my clients were in bankruptcy because they had used and abused a half dozen or more credit cards.

When I started practicing law, the use of consumer credit was prevalent but was used primarily for homes, automobiles and large household appliances. Young working people would buy a home with an FHA or a VA loan, and when they reached retirement age, their home would be paid for. By the time I left the US in the early nineties, materialism was rampant; fueled by easy and pervasive credit. The message was “Why wait, buy it now on credit.”

After I settled in Mexico, a new and disturbing trend has started in the US: the use of equity in the home as security to borrow. You can’t watch TV for an hour without seeing a commercial explaining how easily and quickly it can be done. You are encouraged to incur long term debt to pay off short term debt, mainly the balances on credit cards. There goes the mortgage free home on retirement. All of those I have known who have refinanced their home to pay off credit cards accumulated more short term indebtedness within a year or two. I know a young single mother who had accumulated a healthy equity in her home and tried unsuccessfully on several occasions to borrow on her equity. Her bad credit worked in her favor. She had to struggle and sacrifice to pay her short term debts, but now she has a greater net worth than her peers who have impeccable credit.

In Mexico we find a different situation. Credit cards are not easy to get, and bank loans for the middle class consumer are as rare as hens’ teeth. When loans can be obtained, they are short term and the interest rates are double and triple what they are in the US. Merchants are beginning to extend credit to customers, but most purchases are still for cash. The lack of easy consumer credit can help a society live within its means. On the other hand, economic growth is impeded when entrepreneurs cannot get business loans. Commercial loans for small businesses are almost as hard to get as consumer loans, and the terms are as onerous. Mexico could benefit with a Small Business Administration.

The Mexican banking industry needs to be reformed and revitalized. Capital for small businesses should be made available at reasonable costs. Reasonable credit should be extended to consumers. Recent newspaper articles have disclosed the high fees charged by banks for such customer services as administering accounts and transferring funds. These charges are more than most other Latin American countries. Also, the officers dealing with customers can be peevish and capricious. An example I encountered recently involved a customer who was a co-owner of real-estate held in trust by a local bank. Problems developed between the owners, and the customer sent a letter to the Trust Department lawyers requesting that they be sure to require the signatures of all owners in any future transfers of Trust property. The Trust lawyers became irate and informed the customer that they would not process any future transfers until they received a written, notarized apology for questioning their competence and integrity.

What is needed is a happy medium between the use of credit that permeates commerce in the US, and the sad lack of it in Mexico.

Henri Loridans is an attorney at law in both Mexico and the U.S.A.. His office is in Ajijic, Jalisco, Mexico. He can be reached at This email address is being protected from spam bots, you need Javascript enabled to view it

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