Nubank Sued After a $664 Card Debt Ballooned to $616,000
Finance
Key Facts
—The case. The Federal District’s attorney-general filed a class action against Nubank in Brasília’s 7th public-finance court, seeking to halt charges, refund overpayments and recalculate balances.
—The damages sought. R$10 million ($1.99m) in collective moral damages, plus an urgent injunction to suspend collections and credit-registry filings while the case runs.
—The rates cited. Consumer regulators found revolving-credit interest running between 2.75% and 19.99% a month, and instalment rates between 0.99% and 19.75% a month.
—The worst example. A debt of R$3,338.78 from December 2020 was calculated at more than R$3.1 million ($616,000). Another, R$1,032.51 from January 2021, reached R$857,000 ($170,000).
—The legal theory. Article 28 of Law 14,690 of 2023 caps total interest and charges on revolving card debt at the original sum owed. The state says Nubank blew through it.
—The catch. That cap took effect in January 2024 and courts have held it does not apply retroactively. Both headline debts date from before it existed.
A Brazilian state government is suing Latin America’s largest digital bank, arguing that Nubank revolving credit charges turned one customer’s card balance of about six hundred and sixty dollars into a debt of more than six hundred thousand. On our own arithmetic that is a multiple of roughly nine hundred and twenty-eight times.
The Federal District is the small territory around Brasília, Brazil’s purpose-built capital. Its attorney-general has taken Nubank to court in what Brazilian law calls a public civil action, a class action brought by the state on behalf of consumers rather than by the consumers themselves.
The suit asks a Brasília public-finance court to suspend Nubank’s collections, strike the affected names from credit registries, refund what was wrongly paid and recalculate every balance. It also seeks ten million reais, close to two million dollars, in what Brazilian law terms collective moral damages, a penalty for harm done to consumers as a class.
How Nubank revolving credit turns hundreds into millions
Revolving credit is what a Brazilian card holder falls into when the monthly bill goes unpaid. The unpaid remainder rolls into the next month with interest, and it is among the most expensive credit sold anywhere in the world.
The consumer protection body for the Federal District examined the complaints and found what it called a highly aggressive interest policy. Revolving rates ran from two and three-quarter percent to nearly twenty percent a month, and rates for paying a bill in instalments ran from under one percent to almost the same ceiling.
Compounded, an upper-end monthly rate near twenty percent produces an annual cost above eight hundred percent. That is the arithmetic behind the two cases the state put at the centre of its filing.
One consumer owed just over three thousand three hundred reais in December 2020, roughly six hundred and sixty dollars at today’s rate. The state says that balance has since been calculated at more than three point one million reais, or about six hundred and sixteen thousand dollars.
A second consumer owed just over one thousand reais in January 2021, about two hundred and five dollars, and now carries a debt of eight hundred and fifty-seven thousand reais, some one hundred and seventy thousand dollars. The lawyers describe consumers dragged into a spiral of excessive burden that no household austerity can escape.
What law does the Nubank revolving credit case rest on?
The state invokes Article 28 of Law 14,690 of 2023, the statute that created Brazil’s Desenrola debt-renegotiation programme. It required card issuers to submit interest limits to the central bank for annual approval.
Its first paragraph carries the teeth. If those limits were not approved within ninety days, then the total charged as interest and financial charges may not exceed the original value of the debt.
Regulators never agreed on limits, so the fallback rule bit. Since January 2024 a Brazilian card debt of one hundred reais cannot legally grow past two hundred through interest and charges.
The state’s lawyers push the reading further, arguing that remunerative interest, the one percent monthly late charge, the two percent penalty, operating fees and taxes all count toward that ceiling. If a court agrees, the effect reaches every card issuer in Brazil, not one.
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The problem the filing does not solve
There is a difficulty at the heart of this case that no coverage so far has named. The cap entered force in January 2024, and Brazilian appellate courts have repeatedly held that it does not reach debts contracted earlier.
Both headline debts were contracted in December 2020 and January 2021. On the settled reading of the statute, the very rule the state relies on would not cover the very examples it leads with.
That does not doom the action. The state can argue that charges accruing after January 2024 fall under the cap even on older balances, or fall back on the Consumer Defence Code’s older prohibition on a manifestly excessive advantage.
But it explains why the filing is a test rather than a formality, and why a court might grant a great deal less than the state has asked for. Nubank had not publicly responded when this article was published.
Should foreign residents in Brazil be worried?
Not by this case, but by what it reveals. Brazilian card credit remains punishing at the bottom of the market, and a missed bill compounds faster than almost anywhere a European or American arrival will have encountered.
The practical rule for anyone holding a Brazilian card is to clear the balance in full or convert it to an instalment plan immediately. Never let it roll.
What does the case mean for Nubank’s investors?
The damages sought are trivial against a bank with a credit portfolio worth tens of billions of dollars. The regulatory read-across is not.
A ruling that folds fees, taxes and penalties into the statutory ceiling would compress revolving-credit revenue across Brazilian banking, and it lands while Nubank already faces a harder credit cycle and a cooling share price.
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