A rule that limits credit card interest comes into force in Brazil

This Wednesday, Brazil launched a rule that establishes a ceiling on the collection of revolving interest from the credit card through which the Government of Luiz Inácio Lula da Silva aims to reduce the high number of people in debt in the country.

From now on, the interest accrued in the event of late payment of the credit card bill may not exceed 100% of the original amount of the debt.

Thus, if a person owes 1,000 reais ($200/185 euros) on the credit card, the amount to be paid with interest cannot exceed 2,000 reais ($400/370 euros).

The measure was taken by the National Monetary Council, formed by the ministers of the economic area and the president of the Central Bank, in a meeting held on December 21 and is part of the federal program to reduce debt levels.

“The person who owed 1,000 reais on the credit card, in every few months he was in debt with 10,000 reais and could no longer pay“, explained in a note the Minister of Finance, Fernando Haddad, who pointed out that the norm is a “important step” for “correct the distortions of the Brazilian banking system.”

According to the latest data from the Central Bank of Brazil, last November revolving or late interest on credit cards reached an average of 431% per year.

This type of credit is the most expensive in the Brazilian market and the one with the highest delinquency rates.

Reducing the number of defaulters was one of the main campaign promises of Luiz Inácio Lula da Silva, who on January 1 completed the first year of his third term, having already governed in two consecutive terms between 2003 and 2010.

To this end, it launched the “Desenrola Brasil” program, which seeks to encourage the renegotiation of debts of people registered on the list of defaulters with the intention of reducing their financial commitments and facilitating their reintegration into the credit market.

In the first stage of the program, which concluded last Sunday, debts for a total value of 32.5 billion reais (US$6.6 billion) were renegotiated, benefiting “more than 11 million people”, according to data from the Brazilian Government.