Bank contradicts itself with interest-free installments on Black Friday – 11/07/2023 – Panel SA

Santander runs an ad on TV promoting interest-free installments in 21 installments on purchases through Market Livre during Black Friday. To benefit, the interested party only needs to apply for a credit card issued by the bank.

The campaign, broadcast during Jornal Nacional on TV Globo, contradicts the bank’s CEO, Mario Leão, who, for investors, defended fewer installments on purchases made on interest-free cards.

“The limitation of up to 12 installments is mathematics that doesn’t work,” he said, adding that, in most transactions, payments occur in four or six installments.

“We never proposed that interest-free installments be eliminated, but that there be a phased process,” he said.

Santander’s Black Friday campaign will be used by representatives of retail and machine companies at the Central Bank meeting, this Tuesday (7), which discusses restrictions on interest-free installments.

This group will maintain that the announcement is proof that banks are able to control the risk of credit card operations without imposing restrictions on the number of installments for the entire market.

For weeks, the BC has been trying to reach an agreement around the proposed payment of up to 12 installments initially, gradually reaching a maximum of six installments, as a way of reducing high interest rates on credit cards.

Banks claim that, with family debt, debtors enter the card’s revolving system, which charges interest of, on average, 445% per year.

For them, this feeds a vicious circle, which increases interest rates on this type of credit even further.

Barriers to competition

Abranet (Brazilian Internet Association), which represents 10% of cards issued in the country, disagrees and says that data from the Central Bank does not show interest-free installments contributing to the increase in interest rates or household debt.

The credit card revolving law sanctioned by President Lula recently limited interest to, at most, the value of the debt. It also determined that the CMN (National Monetary Council) defines what self-regulation will be like within three months.

In discussions, Febraban (Brazilian Federation of Banks) says it prefers installments between four and six installments.

For small retailers and payment companies (machines), interest-free installments are an important sales tool and any type of restriction will cause negative impacts on the sector and the economy.

In a letter sent to the BC, Abranet stated that the debate reveals an attempt by banks to restrict competition with small machines in the credit market — which Febraban denies.

In meetings with the municipality, Abranet presented data from the BC itself showing that the profile of those who buy in installments has not changed in recent years. It also states that there was no relationship between the increase in default and paying in more installments (over 12 installments).

Abranet considers that the problem lies in the issuance of a record number of credit cards in recent years. Between 2018 and 2022, the total number of plastics in the market jumped from around 100 million to just over 209 million in 2022, which signals a lack of rigor in granting credit.

Abrasel (Brazilian Association of Bars and Restaurants) agrees that default on credit cards and high interest rates on revolving credit cards cannot be explained by the number of installments.

“The main cause is credit without responsibility, this excess of cards that banks issue”, says Paulo Solmucci, president of Abrasel.

Both entities consider that the sanctioned law only defined an interest ceiling for the revolving loan. For them, there is no legal guideline for the CMN to change the installment plan.

BC Independence

Recently, however, BC directors stated that the authority has a mandate to modify any financial product on the market, regardless of law.

In Congress, the Parliamentary Trade Front is already signaling that there will be contrary reactions if the rules defined by the CMN restrict interest-free installments too much.

“If anyone tries to come up with a project or path to a resolution, ordinance or decree, we are prepared to defeat it. We will take it down,” said deputy Domingos Sávio (PL-MG), president of the front in the Chamber.

When contacted, Santander did not respond until the publication of this report.

With Diego Felix It is Paulo Ricardo Martins

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