For breaking an ad, group in BC pulled Campos Neto’s ear – 08/12/2023 – Panel SA

The ear pull on the president of the Central Bank, Roberto Campos Neto, came from the Secretary of Economic Reforms of the Ministry of Finance, Marcos Pinto, and the other members of the working group that, for three months, has been discussing the end of revolving credit on the card .

The group, which operates in BC, is formed by the president and two other directors of the autarchy, Marcos Pinto (Finance), representatives of Febraban and the four largest card issuers (Itaú, Bradesco, Santander and Nubank).

The idea was to reach a definitive proposal in two months. There is still a lack of representatives from retail and vending machines (they anticipate payment in installments to shopkeepers) in the group.

However, during a hearing in the Senate, the head of BC announced that he intends to end the rotary as a way to reduce the Selic, the economy’s basic interest rate.

The autarchy is under pressure from the Lula government to cut it —today, it is 13.25% a year. A bill pending in Congress intends to reduce the interest on the revolving, which reaches 453% per year.

The diagnosis, according to members of the working group, is that, with a default rate of 53%, the revolving credit makes the other lines of credit more expensive and, therefore, impacts the Selic, which would justify a radical change in the product.

For this, there are, at the moment, several options on the table of discussion of the working group in BC. The main one is precisely the one that puts an end to the rotary.

Under this new system under discussion, when defaulting, the borrower would automatically migrate to debt installments with interest of 8% per month, equal to that of the overdraft, lower than that currently practiced on cards.

With the new proposal, when entering the installment plan, the debtor will have his limit cut, that is, he will only recover the ability to buy after returning to the blue.

21% of GDP on purchases

Calculations that will be presented at the group’s meeting next week show that, in this way, card purchases will suffer a drop of R$ 350 billion per year. That’s because 35% of customers will be affected by the restriction, equivalent to 65 million cards.

Currently, credit card purchases move R$ 2.1 trillion (21% of GDP) per year. Of this total, 75% of purchases are paid in interest-free installments. Only 25% occur with installments and interest.

In other countries, such as the US and the UK, this proportion is the opposite – 25% of installments are interest-free and 75% are interest-free.

The working group considers other options, which are based on discouraging interest-free installment payments. It is considered that, by dividing expenses for months on end, the consumer is more likely to default on the card bill. This is because, over a longer period, it is exposed to upheavals in financial life.

Therefore, it is considered charging a fee (still to be defined) from the fourth installment to get rid of interest. This charge would be a kind of insurance against default.

Another possibility would be to increase the interchange fee (charged from the merchant by the card issuer) in these interest-free installment operations.

With Diego Felix

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