interest-free installments should be maintained, say banks

The Brazilian Federation of Banks (Febraban) has discarded the intention of putting an end to purchases in installments using credit cards. The entity participates in multidisciplinary groups that analyze the causes of interest rates practiced and alternatives for redesigning the revolving system, on the one hand, and, on the other, improving the purchase installment mechanism.

“None of the models under discussion presupposes a rupture of the product and how it is financed”, said the president of the entity, Isaac Sidney, through a note. The possibility of extinguishing the rotary was mentioned on Thursday (10) by the president of the Central Bank, Roberto Campos Neto, during a hearing in the Senate.

According to the president of Febraban, the credit card must be maintained as a relevant instrument for consumption, preserving the financial health of families.

“This is because studies indicate the need for measures to rebalance cost and credit risk. To do so, it is necessary to discuss the great distortion that only exists in Brazil, in which 75% of issuers’ portfolios and 50% of purchases are made with interest-free installments.”

Febraban studies also show that the financing term has a direct impact on the cost of capital and on the credit risk, and the default on long-term purchases in installments is much higher than on the spot modality, about twice on average portfolio and three times for the low-income public.

Data from the Central Bank show that the interest rate on the revolving credit card was 15.04% per month in June, while that of installments was 9.47% per month. This modality has an average concession period of 13.3 months. Default is almost five times higher in revolving than in installments. In this, it was 9.94% in June. In that one, 49.05%.

Sidney stated that the entity will continue to pursue a constructive solution that undergoes a gradual transition, so as to reach convergence that, at the same time, benefits consumers and guarantees the viability of the product for the links that operate in the credit card industry, such as brands, issuing banks, acquirers (small machines), shopkeepers and consumers.