In the latest development, Brazil has introduced a limit on credit card interest rates due to a high level of default.
The new regulation imposed by President Luiz Inácio Lula da Silva’s administration limits the maximum interest rate to 100% of the original debt.
For example, if a person owes $200, their total repayment, including interest, cannot exceed $400.
Brazil’s average annual interest rate, as per the Central Bank of Brazil, stands at 431%.
Finance Minister Fernando Haddad called this measure a “significant step” to correct Brazil’s banking system distortions due to spiraling citizen debts.
The Desenrola Brasil initiative seeks to renegotiate defaulted loans, easing defaulters’ financial strain and aiding their reentry into the credit market.
The initiative received approval from the National Monetary Council, composed of economic ministers and Central Bank President Roberto Campos Neto.
The Brazilian government announced that as of December 30th, debts totaling $6.6 billion were renegotiated in the program’s first phase, which has benefited over 11 million people.
Alarming interest rates in Brazil
Brazil’s average annual credit card interest rate is an alarming 431%, leading the government to cap it at 100% of the original debt.
In contrast, countries like Canada federally limit annual interest rates to 60%, and in Quebec, the limit is 35%.
Japan has strict laws capping rates between 15% and 20% annually, with penalties for exceeding 20%.
In the United States, usury laws are state-specific, with each state establishing legal maximum interest rates for loans.
Usury laws differ globally, reflecting cultural and economic variations.
Italy, France, and Germany have specific legal caps, usually around 10% to 15% above the average rate.
The Middle East’s Islamic finance principles prohibit excessive interest, aligning with religious teachings.
Brazil’s higher tolerance for usury may be due to its unique economic challenges like market volatility and inflation, which necessitate higher rates for financial stability and risk compensation.
However, these high rates can exacerbate debt issues, indicating a complex balance between market demands and consumer protection.
More: Brazil news in English, every day from The Rio Times.
This article was produced by The Rio Times’ automated AI newsroom. Editorial responsibility: Matthias Camenzind, Publisher and Editor-in-Chief. The Rio Times also runs Ask Rio Times, which answers from 100,000+ of our own articles, the daily Latin America Power Map, and prediction-market odds on elections and markets.. How we use AI · Report an error