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Unroll: A debt renegotiation initiative
The federal government launched the Desenrola program to help consumers renegotiate their debts with banks.
On Tuesday (5), the Chamber of Deputies validated the Desenrola bill, which, in addition to focusing on debts, addresses interest on credit card revolving credit. The vote was symbolic, and only the Novo party positioned itself against the proposal.
Limitations on Interest and Transactions in the Financial Sector
Read also: Desenrola Brasil begins second phase of renegotiation: Find out who can benefit now
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The federal Desenrola program aims to make it easier for consumers to renegotiate their debts with financial institutions. During its analysis, there were moves to establish a ceiling for interest on revolving credit, which is activated when the bill is not paid in full on time.
Congressman Alencar Santana (PT-SP), rapporteur of the measure, proposed an article to restrict interest on revolving credit cards and installment credit to 100% if banks do not offer a suggestion for self-regulation within three months.
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However, the document does not discuss the end of interest-free installment purchases, a practice that banks attribute as the cause of the high rates – which reached 437% per year in June. There was pressure from banks to include this discussion, but the rapporteur remained firm.
According to the report, “Credit card issuers, in an effort to self-regulate, must propose to the National Monetary Council, through the Central Bank of Brazil, limits on interest and charges on the outstanding balance of invoices.”
Reflections and Decisions on Revolving Credit
Until June, the revolving rate was 437% per year and the installment rate was 196.1%. Since 2017, after 30 days in the revolving credit, banks have had to transfer the debt to installment credit, but this action did not significantly impact the rates.
Economic experts note that installment credit does not only encompass the renegotiation of revolving debts. If analyzed separately, they would have rates similar to the most expensive modality in the current Brazilian market. Therefore, eliminating revolving credit alone would not fully solve the issue of excessive interest rates.
The replacement of revolving credit by installment payments is a consensus among experts, and setting a ceiling for interest rates was already on the table. The United Kingdom, for example, limits interest on certain loans to a percentage of the total debt.
One source said the most likely limitation under discussion is interest up to 100% of the debt amount. However, the same source sees confusion in the rapporteur's text and believes this should not be a self-regulatory item.
Finally, banks have realized that ending revolving credit can minimize defaults, and are now trying to convince retailers to restrict interest-free installment payments. In public statements, banking institutions and industry associations deny any intention to eliminate the product. However, Alencar emphasized that limiting installment payments is not the way forward, considering it a “victory for Brazilian society.” This point does not appear in his report.
