BRASILIA (Reuters) - Brazil's Finance Ministry says the measures stipulated in a recent legislation aimed at diminishing credit card revolving interest rates are a rational step, a top official said on Wednesday.
During a debate hosted by local newspapers Valor Economico and O Globo, Marcos Barbosa Pinto, the ministry's Secretary of Economic Reforms, said that the legal limit allowing debts to double in size at most "makes some sense in a situation where we have very high nominal rates affecting the credit card bills."
The revolving credit card interest rate in Brazil is 445.7% per year, 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 the revolving credit card line.
Pinto pointed out that the mechanism outlined in the law passed earlier this month has been tried and tested in other countries, preventing consumer and banks from using expensive credit modalities for long periods and thereby averting snowballing debts.
He emphasized the need to "create a system where competition occurs more forcefully and explicitly in interest rates," highlighting that consumers currently select credit cards based on criteria such as credit limits or benefits.
Congress passed a bill last week requiring credit card issuers to submit self-regulation measures to the National Monetary Council (CMN) outlining limits on interest rates and financial charges in revolving credit card lines.
If these limits are not approved within 90 days by the CMN, made up of the Finance Minister, Planning Minister, and central bank governor, interest and fees on this debt type cannot surpass the original debt.
Currently, the Finance Ministry is in a passive position, awaiting industry player proposals, said Pinto.