BRASILIA (Reuters) -Brazil's National Monetary Council, the country's top economic policy body, on Thursday set regulations on a measure passed in October to limit interest rates and financial charges in revolving credit card lines to twice the initial amount of debt.
According to the central bank, the rules establish the definition of technical concepts and regulate the possibility of credit portability for credit card debts and other payment instruments.
The council "simply (regulated) what had passed into law," Finance Minister Fernando Haddad told journalists, adding that the new framework will reduce interest rates he called "stratospheric."
In early October, Congress passed a law mandating credit card issuers and similar actors to propose self-regulation measures to the monetary council to reduce credit costs.
But no consensus was reached among the issuers, so the 100% cap, which had been outlined in the law as a fallback, became effective.
The move sets out to curb high default rates on revolving credit card lines, which the government claims lead to snowballing debt, particularly among the poorer population.
The revolving credit card interest rate in Brazil is 431.6% per year, 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 bear this fee when they do not pay the entire credit card bill, with the remaining amount subject to interest. The central bank established in 2017 that consumers are restricted to a maximum of 30 days on this line.
After this period, those who fail to settle the due amounts fall into the installment with interest credit card line, with interest rates of 195.6% per year, equivalent to about 9.5% per month.