INSS: payroll loan interest will drop to 1.70% – 03/13/2023 – Market

The CNPS (National Social Security Council) approved, in a meeting this Monday (13), the fall in interest rates on payroll loans from the INSS (National Social Security Institute). The personal loan rate, currently at 2.14% per month, will drop to 1.70%, and the credit card and payroll card rate will drop from 3.06% to 2.62%.

The INSS payroll loan is a loan with a discount directly on the social security benefit. The measure is controlled by the council, which brings together government representatives, retirees, workers and companies.

The reduction in interest rates was a demand of retirees and was being defended by the Minister of Social Security, Carlos Lupi. For him, because it is a credit with low risk of default, it would be possible to reduce the level charged.

According to João Inocentini, president of Sindnapi (National Union of Retired Persons) of Força Sindical, the bank’s proposal was a little higher, interest at 2.04% per month, but the government proposed 1.70%, which was approved .

For him, however, the significant drop in rates may mean that smaller banks are unable to operate credit. “I think we have to do calculations so that the banks [menores] keep offering, because the impact is very big.”

A working group will be formed to discuss the fee paid by the institutions to operate the payroll loan. According to him, this rate would need to fall to ensure a broader hiring option.

“I think most banks [menores] will not be able to do this operation anymore. Those who need it the most will have a hard time. We need to lower the rate, because they are the ones who go to the slums, to the countryside, to the sertão to do payroll deductions.”

For now nothing changes. The fees to be charged remain at the current level. The change will only occur after the publication of a resolution with the measure.

In a note, Febraban (Brazilian Federation of Banks) states that the financial sector reiterates the position previously presented to the Ministry of Social Security and the INSS that, with high funding costs, any reduction in the ceiling would compromise the loan offer.

“Initiatives like these generate relevant distortions in the prices of financial products, producing effects contrary to what is desired”, says the note.

According to the federation, the two INSS payroll credit lines — loan and card — have a balance of BRL 215 billion on loan. In all, 14.5 million retirees and pensioners with an average benefit of R$1,576.19 took out this type of credit. Of this total insured, 42% are people with a dirty name.

Social Security claims that the 0.44% decrease in interest will benefit more than 37 million citizens, including retirees and pensioners. The minister again affirmed that payroll loans bring security to financial institutions, as it has a low risk of default, since the discount of the monthly installment is made directly on the benefit payroll.

“With the payroll guarantee, there is security to reduce the risk of loans, as well as in the case of civil servants. Therefore, we present and defend the reduction proposal, which was approved by the council”. The reduction had 12 votes in favor and three against.

Understand the INSS payroll loan

Under current rules, INSS insured persons can commit up to 45% of the benefit to payroll loans. Of this total, 35% are for the personal loan, 5% for the credit card and 5% for the benefit card, created last year.

The loan can be repaid in up to 84 months, which is seven years. The interest is capped, which means that the financial institution can charge less, but not more than this rate.

In a note last week, Força Sindical defended “a drastic reduction of the rates” of interest, classifying the collection in force as “prohibitive” and “true extortion”.

The central presented calculations in which the annual interest of the payroll exceeds the Selic (basic interest rate of the economy), which is at 13.75% and has been a reason for a clash between the president of the Central Bank, Roberto Campos Neto, and the president of the Republic, Luiz Inacio Lula da Silva.

The maximum percentage per year charged from retirees on payroll reaches 29.93%, in the case of the loan, and 43.58%, in the case of the credit card. During the pandemic, rates were reduced, the loan reached a monthly level of 1.80% in March 2020, which lasted until the end of 2021.

The INSS payroll loan interest rates are currently the lowest available in the credit market, so a “drastic” reduction could jeopardize the offer of this credit to retirees and pensioners, if the operation by banks and financial institutions becomes unfeasible.

“The entities are in favor of lowering interest rates to benefit retirees and pensioners, but we want to discuss this to understand on what bases this will be done so that the offer of credit for this population does not decrease. So that they do not go into debt getting personal credit or even loan sharking”, said lawyer Tonia Galleti, coordinator of the legal department of Sindnapi (National Union of Retirees, Pensioners and Elderly People).