Retirees Feel Good About New Credit Card Law: Your Pocket Is Thanking You!

The new credit card law was created to prevent retirees from becoming burdened with debt due to interest charges.

Using a credit card has become a common practice among Brazilians, providing convenience and financial flexibility.

However, this facility also brought a significant increase in debt, especially in 2023, when interest rates on revolving credit reached worrying levels.

In response to this situation, the government implemented new legislation in January 2024, aiming to protect consumers from abusive practices and ease financial pressures on those who rely most on credit, such as retirees and workers.

Credit card debt grew in 2023

The year 2023 saw a significant increase in Brazilian household debt, especially due to the use of credit cards.

According to the National Federation of Trades in Goods, Services and Tourism, the percentage of households in debt reached 78.8% in May 2024, the highest level since November 2022.

At that time, credit cards were the main villain, present in 86.9% of debt cases, followed by pay stubs (16.2%) and personal credit (9.8%).

In addition to the increase in the number of households burdened with debt, the default rate also remained high, with 28.6% of Brazilian households suffering from overdue bills.

Although this figure remained stable compared to the previous month, it is still a worrying indicator of the difficulty households are facing in managing their debt.

To give you an idea, the percentage of households declaring their inability to pay their debts reached 12% in May 2024, a slight increase compared to the same period the previous year.

Another factor that contributed to the increase in debt was the gradual decline in the base interest rate, SELIC, which lowered the cost of financing and encouraged increased demand for credit.

However, despite the Selec cut, interest rates on revolving credit continued to rise, reaching a staggering 431.6% per annum in October 2023.

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The new legislation on the use of credit cards, which was approved in December 2023 and came into effect from January 2024, has made significant changes to the way interest is charged on revolving credit.

One of the main changes is the cap on revolving interest, which now cannot exceed twice the original value of the debt.

This novelty emerged to protect consumers from abusive practices that were common in the past, when the interest charged disproportionately multiplied the debt.

To better understand, previously, when a cardholder was unable to pay the bill in full by the due date, the remaining amount was transferred to revolving credit, accruing exorbitant interest.

In other words, if a consumer has a credit card debt of R$10,000, the maximum that can be charged in revolving interest will be R$20,000, regardless of how long the debt remains open.

Additionally, the new law also imposed limits on credit card debt renegotiation, requiring banks to offer fairer and more transparent terms for debt repayment.

Banks had 90 days to adapt to these changes, and effective implementation of the new rules was closely monitored by the National Monetary Board and the Senate.

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Understanding PL Invoices

Another measure under discussion in Congress is Bill 755/24, also known as PL da Cobrança, which seeks to protect consumers from abusive practices related to automatic debiting of credit card bills.

The project considers that the contractual clause that allows the automatic deduction of the value of a partial or full invoice to the current account of its owner is arbitrary, without his express consent.

This practice, common in many adhesion contracts, has been criticized because it is akin to garnishing the debtor’s wages, which can seriously impair his ability to cover other essential expenses.

The bill’s author, MP Jonas Donizet (PSB-SP), says the automatic debit ignores traditional debt collection rules and could lead to the misappropriation of consumers’ income.

The project will be finally examined by the Consumer Protection, Constitution, Justice and Citizenship Committees, before being sent to the plenary session for a vote.

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