Brazil curbs debt growth on revolving credit cards Reuters

BRASILIA (Reuters) – Brazil’s National Monetary Council, the country’s top economic policy body, on Thursday set a regulation on a measure taken in October to cap interest rates and finance charges on revolving credit card lines at twice the original amount owed.

According to the central bank, the rules establish the definition of technical terms and regulate the transferability of credit for debts from credit cards and other payment instruments.

The council “simply (regulated) what became law,” Finance Minister Fernando Haddad told reporters, adding that the new framework would reduce interest rates, which he called “stratospheric.”

In early October, Congress passed a law requiring credit card issuers and similar players to propose self-regulatory measures to lower credit costs to the Monetary Board.

The move aims to curb high default rates on revolving credit card lines, which the government says is leading to mounting debt, particularly among the poorer population.

The interest rate on revolving credit cards in Brazil is 431.6% per annum, or 14.9% per month, according to the latest data from the central bank, by far the most expensive type of credit for individuals.

Consumers incur this fee when they don’t pay their credit card bill in full, with interest accrued on the remaining balance. In 2017, the Central Bank stipulated that consumers are limited to a maximum of 30 days on this line.

After that time, those who default on the amounts owed fall into repayment with an interest-bearing credit card at an interest rate of 195.6% per annum, which equates to about 9.5% per month.