By André Jerusalmy and Fernanda Lazzarini

Bill No. 1,166/2020 was recently approved by the Senate, which establishes that for all debts incurred during the period from March 2020 to July 2021, credit card and overdraft interest will be limited to 30% (thirty percent) per year (“PL”).

The PL was created due to the consequences of the COVID-19 pandemic, as, with the paralysis of the economy and reduction of salaries, if not layoffs, there was a loss in the population's ability to pay, due to the lack of income.

Due to the lack of resources, the affected population resorts to credit cards to make their purchases. However, even with the recovery of the economy, many people will not be able to pay the entire bill, entering into the so-called “revolving credit”, which can currently exceed 300% per year, and in some cases reach up to 600% per year.

The initial wording of the PL proposed a limit of 20% of interest per year, however, it was increased to 30%, a value still well below that practiced in Brazil. As for fintechs, financing and investment credit companies, direct credit companies and payment institutions, the limit of 35% per year was established. The vote also included the prohibition of charging fees on outstanding invoices and determined that, at the end of the pandemic, the National Monetary Council (“CMN”) will establish the credit card interest rate ceiling and its technical criteria.

Failure to comply with the established limit constitutes the crime of usury, which is the charging of interest in an abusive manner and carries a penalty of six months to two years and a fine. However, it is important to emphasize that the reduction in the interest rate will not be extended to consumers who have incurred debts through fraudulent acts or in bad faith.

The bill under consideration takes into account nominal interest rates, which are those that do not take into account inflation for the period. These interest rates are applied when the customer is unable to pay the entire amount of the card bill and opts to pay the amount in installments, which will be paid in subsequent monthly installments plus interest, thus creating revolving credit – a credit that, in June of this year, according to the Central Bank of Brazil (“BCB”), had a rate of 242% for regular bank customers.

With the favorable vote in the Senate, the text of the PL now goes through analysis and voting in the Chamber of Deputies.