Key Points
— Private-sector payroll loan originations fell 22.5% in February to R$7.1 billion ($1.25 billion), down from R$9.2 billion ($1.6 billion) in January
— Average interest rates on private consignado loans rose from 57.4% to 59.4% annually — the opposite of what Lula’s Crédito do Trabalhador program was designed to achieve
— Credit card revolving rates also climbed to 436% annually, up 11.4 percentage points in a single month
The Rio Times, the Latin American financial news outlet, reports that Brazil consumer credit conditions deteriorated sharply in February as the Central Bank released data showing a 22.5% monthly drop in private-sector payroll loan originations. The volume fell from R$9.2 billion ($1.6 billion) in January to R$7.1 billion ($1.25 billion), according to figures published Monday.
More concerning for the government, interest rates on private consignado loans rose from 57.4% to 59.4% annually. This is the opposite of what Lula’s Crédito do Trabalhador program — launched in late March 2025 — was designed to deliver.
A Policy Working in Reverse
The Crédito do Trabalhador was Lula‘s signature consumer finance initiative. By allowing private-sector workers to use their FGTS (severance fund) balances as collateral for payroll-deducted loans, the government expected borrowers to migrate from expensive personal credit lines to cheaper consignado products.
Instead, banks have used the transition period to reprice upward. Fernando Rocha, head of the Central Bank’s statistics department, characterized the current rate environment as a “new plateau” rather than a temporary spike — suggesting that 59.4% may be the baseline, not an anomaly.
The outstanding balance of private consignado loans still grew 5.9% in February, reaching R$92.5 billion ($16.2 billion). But the combination of a rising stock and falling new originations signals that existing borrowers are rolling over debt at higher rates rather than accessing fresh credit on better terms.
Credit Card Rates Hit 436%
The consignado data arrived alongside an even more striking number: credit card revolving rates climbed to 436% annually in February, up 11.4 percentage points from January. The revolving credit line affects roughly 40 million Brazilians.
Congress capped revolving credit charges at 100% of the original principal starting in January 2024. However, the Central Bank’s statistical methodology annualizes monthly rates, meaning the reported 436% figure reflects the pace of accumulation rather than what borrowers ultimately pay under the cap.
The Selic Connection
The broader credit squeeze is inseparable from monetary policy. With the Selic at 14.75% after the Copom’s 25-basis-point cut earlier in March, the base rate remains historically elevated. Banks are passing those costs through to consumer products with wide spreads, compounding the pressure on a population already carrying record household debt levels.
The latest Focus survey showed inflation expectations rising for the 21st consecutive week, with 2026 IPCA forecast at 4.31% — well above the 3% target. Goldman Sachs has pushed its forecast for the next Selic cut to September, meaning consumer borrowing costs are unlikely to ease in the near term.
For Lula’s government, the February data presents a political problem. The Crédito do Trabalhador was marketed as relief for workers squeezed by high borrowing costs. One year into the program, the workers it was meant to help are paying more, not less.
Read More from The Rio Times