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Some of Brazil's mid-sized banks, which have a heavy presence in the segment that handles payroll loans for retirees, have begun suspending this type of funding for clients under 60 who are retired due to a disability.
The halt on these loans has been applied because some 1.1mn of these retirees are having their benefits reviewed to see whether they are fit to return to the labor market as part of the government's attempt to cut pension costs.
As any loan payments are deducted directly from pension payments from the national social security institute (INSS), banks fear these clients will end up defaulting.
O Globo reported that Banco Daycoval has already sent out a statement to its relevant branches and third-party employees in charge of attracting new clients, stating that payroll loans for those retired because of a disability should only be granted to people over 60, as they are not a part of the group having their benefits reviewed.
Other mid-sized banks, like Banco Safra and the China Construction Bank, are also said to have sent memos to their employees stating they no longer "attend retirees under code 32," which refers to disabled retirees under 60.