Introduction
BRASILIA (Reuters) – Brazil’s National Monetary Council, the country’s top economic policy body, has implemented regulations to address the issue of skyrocketing interest rates and financial charges associated with revolving credit card lines. These regulations, which were passed into law in October, aim to limit the interest rate to twice the initial debt amount. In addition to defining technical concepts, the new rules also address credit portability and other payment instruments. Finance Minister Fernando Haddad highlighted the significant reduction in interest rates that these regulations will bring, referring to the current rates as “stratospheric.”
Tackling the High Default Rates
The Brazilian government has been keen to address the increasing default rates on revolving credit card lines, particularly among lower-income individuals. In early October, Congress passed a law mandating credit card issuers and similar entities to propose self-regulation measures to the monetary council, aiming to lower credit costs and curb the problem of snowballing debt.
The Most Expensive Credit Type
Revolving credit cards in Brazil currently carry an interest rate of 431.6% per year or 14.9% per month, making it the most expensive type of credit available to individuals. Consumers are burdened with this fee when they fail to pay their entire credit card bill, resulting in the remaining amount being subject to interest charges. These new regulations are expected to provide relief to Brazilian consumers by reducing interest rates and preventing the accumulation of unmanageable debt. By implementing self-regulation measures, the government aims to promote responsible lending practices and improve financial stability for individuals across the country.