INSS payroll: 7 out of 10 borrowers earn up to 2 minimum wages

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With the credit line suspended, retirees and pensioners need to resort to more expensive credit. Group also makes up the group with the lowest average income in the other two payroll-deductible groups (in the public and private sectors). This Tuesday (28), the National Social Security Council (CNPS) established a new ceiling of 1.97% per month for payroll loans for INSS beneficiaries, after the suspension of the credit line by Brazilian banks. The institutions had suspended the modality when the CNPS reduced the interest ceiling from 2.14% to 1.70% per month – more than expected by banks and finance companies. Banks claimed that the new interest rate made the operation economically unfeasible — including public banks Caixa Econômica Federal and Banco do Brasil. The suspension of the payroll loan for beneficiaries of the National Institute of Social Security (INSS) affected, in particular, a lower income population group. That’s because seven out of 10 INSS beneficiaries who resorted to the loan or payroll credit card earned up to 2 minimum wages, according to the latest BC data. By way of comparison, among workers in the public sector who took payroll, those earning up to two salaries accounted for less than 25% of clients. And in the private sector, just over 40%. Therefore, the suspension of the modality after the government’s decision to lower interest rates more than expected is worrying: it exposes the poorest population to more expensive credit. Payroll loans have the lowest interest rate among credits available to individuals. Without payroll, people end up resorting to other modalities with higher interest rates, such as credit cards and overdrafts. As g1 showed in an article published this Monday, loans with worse interest rates increase the borrower’s income commitment. This means that interest consumes more of the salary and this makes payment difficult, increasing default. Hence the government’s haste to reduce the interest ceiling for this modality: serving a poorer population that needs credit. Income distribution Retirees and pensioners make up the group with the lowest average income in the three payroll groups (INSS, public sector and private sector). The average income of retirees and pensioners was R$1,959, equivalent to 75% of the average salary of a private sector worker (R$2,614) and less than half of public sector workers with a formal contract (R$4,416) and statutory (BRL 5,155). The data are from 2021, the last year with results available through the Continuous PNAD. LEARN MORE ON THE PODCAST BELOW: Loan suspended and interest deadlock Brazilian banks suspended payroll for INSS beneficiaries when the National Council for Social Security (CNPS) reduced the interest ceiling beyond what banks and financial institutions expected. With the decision, the ceiling for the traditional payroll increased from 2.14% to 1.70% per month. In operations with a payroll credit card, interest increases from 3.06% to 2.62% per month. The banks claimed that granting credit at this level of interest is unfeasible. The list included big names in the sector, such as Bradesco, Itaú Unibanco, Caixa, Banco do Brasil, Daycoval, Pagbank and PAN — but they reached 95% of the banks. Last week, in a meeting with the government, banks offered to reduce the payroll interest ceiling for INSS retirees to a range between 1.99 and 2.01%. The Ministry of Social Security advocated that interest rates remain at around 1.95% per month, or slightly below. The government insisted on a value below 2%.

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