Brazil Aid: Caixa will no longer offer loans – 02/23/2023 – Market

Caixa Econômica Federal has decided to definitively close the offer of payroll loans to beneficiaries of Auxílio Brasil – a program that will once again be called Bolsa Família. New loan grants had been suspended since January while the modality was under review.

“Caixa informs that the technical studies on Consignado Auxílio have been completed and that the bank has decided to withdraw the product from its portfolio. The credit line was suspended since January 12th for review”, said the bank, the main operator of the loan. , in note.

According to Caixa, there are no changes to contracts already made. “The payment of installments continues to be carried out automatically, through the discount on the benefit, directly by the Ministry of Development and Social Assistance, Family and Fight against Hunger”, he said.

On February 9, the government of President Luiz Inácio Lula da Silva (PT) announced new rules with the aim of restricting household indebtedness. The main change was the reduction of the limit from 40% to 5% on the portion of the monthly benefit that can be deducted to settle the loan installments.

An interest rate was also applied lower than that determined last year, decreasing from 3.5% to 2.5% per month – at Caixa, the interest rate was slightly below the ceiling (3.45% per month) . The interest rate established in the first credit format is equivalent to 51.1% per year. The measure also limited the number of monthly and successive installments to six. In the previous rules, payments were allowed in up to 24 months (two years).

Since its implementation, specialists consider the type of loan for beneficiaries of the Brazil Aid to be risky. The debt remains in case of loss of right to social benefit while the loan has not been fully paid off.

The release of payroll hiring was used as an asset in the campaign of President Jair Bolsonaro (PL), who ended up defeated by Lula in the elections.

Auxílio Brasil payroll loans totaled around R$5 billion in October 2022, according to data from the Central Bank. Caixa accounted for R$ 4.3 billion released between the beginning of the operation, on October 11, and the 21st of the same month.

Most banks, however, did not want to offer the credit line due to the high risk of default, in addition to possible damage to the image of the institutions by embarking on a policy that, in practice, encourages the indebtedness of a vulnerable population.

After the second round of elections, the public bank began to restrict the offer of its lines of credit and changed the analysis of loans to beneficiaries of the income transfer program.

In November, the bank started releasing less money in concessions, limiting the commitment of income to 20%, compared to the 40% valid ceiling.

The beginning of the concessions was marked by complaints of canceled credit, delay in releasing the money, charging extra fees and overloading Caixa’s systems.

The modality was even suspended before the second round of elections, following a recommendation by the TCU (Union Court of Auditors). In early November 2022, however, TCU minister Aroldo Cedraz denied a request by the Public Prosecutor’s Office for Caixa to stop making new payroll loans to aid beneficiaries.

On November 14, the bank released the modality again, but started to limit the offer of its credit lines after having reached the budget limits for the year 2022 and changed the analysis of loans from Auxílio Brasil.

During the transitional government, a committee formed by employees and former directors of Caixa warned Lula about the risk of over-indebtedness of low-income families with the granting of payroll loans to these beneficiaries.

In January of this year, upon taking office as president, Rita Serrano announced the suspension of the Auxílio Brasil payroll loan, which will now be removed from the bank’s portfolio.

“The bank can’t afford that,” Serrano said at the time. “We decided to suspend this modality for two reasons. The first is that the government is reviewing the registration. [manter]. The second is that interest rates are too high for this portion of the population.”

The Minister of Development and Social Assistance, Family and Fight against Hunger, Wellington Dias, has already stated that families who wish to take credit to undertake will have access to other more appropriate lines, such as Pronampe. Those in debt will be able to ask for help to renegotiate their debts through the Desenrola Brasil program, which will be launched by the government.