Proposal that facilitates the execution of debts advances in the Senate – 07/05/2023 – Market

The CAE (Economic Affairs Commission) of the Senate approved this Wednesday (5) the so-called Marco das Garantias, considered fundamental by the government of Luiz Inácio Lula da Silva (PT) to reduce the cost of loans in the country.

The proposal frees banks and other creditors to execute debts in case of default, including those without a real guarantee (such as a property or vehicle), without the need to go through the courts, as is the case today.

The original proposal was sent at the end of 2021, still under the government of Jair Bolsonaro (PL), but ended up being embraced by the current management in view of the expectation of positive effects on the credit market.

The endorsement for broader use of the route that dispenses with Justice –today restricted to real estate– was included by the rapporteur of the text, Senator Weverton Rocha (PDT-MA), who promoted a series of changes after approval by the Chamber of Deputies, in the year past.

On another front, he also eliminated the section that sought to break Caixa’s monopoly on pledge, a line of credit in which the bank accepts goods (such as jewelry, watches and works of art) as collateral for loans. In this way, the public bank will continue as the sole operator of the modality —a way to prevent the greater exploitation of this niche from opening up space for abusive practices and loan sharking.

The proposal still needs to be approved by the full Senate. Voting is scheduled for this Wednesday. Due to the changes made by the senators, the text will have to be analyzed again by the federal deputies.

The version coming from the Chamber already contained devices to accelerate the extrajudicial execution of secured debts (as in the case of automobiles), with greater ease in blocking and auctioning assets. Today, the process is more time consuming, especially in the seizure of vehicles.

The rapporteur, however, decided to expand the use of the instrument and allow the execution of loans in a broad way, even if the contracted amounts are not linked to real guarantees.

One of the justifications is to unburden the Judiciary, which today has its biggest bottleneck in enforcement actions. Surveys used by the government indicate that cases of this type represent 43% of legal proceedings in Brazil.

Thus, the expectation of the Ministry of Finance is that the cost of credit will fall —especially in unsecured operations— given the possibility that the creditor does not need to go to court if the debt is not paid.

The project was on Tuesday’s agenda, but the vote was postponed due to a complaint by senators. Senator Tereza Cristina (MS), leader of Progressistas, said that the project was “a gain”, but needed to be discussed more “in depth”.

“[O projeto] it is a gain, but I think it needs to be looked at in more detail, more deeply. We cannot also leave some weaknesses that can make the debtor have the possibility of losing his property in a hasty way, “he said.

“Do we have to make it easier? We have to make it easier. But now, with more and more intermediaries to discuss debts, this cost is much greater for those who owe it”, also protested Senator Omar Aziz (PSD-AM), who is part of Lula’s base .

In this Wednesday’s session, the rapporteur agreed to remove from the text the prediction that the debtor could only pay the remainder of the debt in up to six installments to avoid foreclosure. From the verbal agreement made by the senators, the payment conditions can be negotiated between the parties.

Another point of criticism is the possibility of using it as a guarantee in more than one loan. The ease, in the opinion of people opposed to the project, may increase the indebtedness of families.

Despite the fear that the PL will harm more humble people, the government’s assessment is that extrajudicial collection will not affect small debtors, since banks are usually committed to collecting debts above R$ 100,000. Below that, the costs would not compensate for the effort to recover the values.

In addition, government interlocutors point out that the new version of the project excluded a device considered dubious about the so-called family asset – which cannot be pledged to pay debts. In this way, the seizure of the only property that protects people or their property remains prohibited by law.

The first version of the report intended to make debt enforcement via notaries mandatory, but the government disagreed with this model and asked for an adjustment, so that it is an optional path. In this way, the creditor will be able to choose which type of collection to adopt, whether via the Judiciary or via notaries.

To overcome the resistance of court officials, the rapporteur stated in his opinion that, “in a first moment”, the extrajudicial execution “should be carried out by court officials upon request of the protest notary” by means of electronic communication.

The government’s expectation is that the flexibility will facilitate the process of taking goods and carrying out the auction. This should have an impact on reducing bad debt – which is one of the main components of the so-called banking spread, the difference between the funding cost of financial institutions and the interest charged on loans.