STF has five votes to authorize bank to repossess debtor’s property

The Federal Supreme Court (STF) began judging this Wednesday (25) the validity of the law that allows banks and other financial institutions to repossess a property, in the event of non-payment of installments, without having to go to court. The score is 5 votes to 0 for maintaining the law. The rapporteur of the process, minister Luiz Fux, voted for the constitutionality of the rules.

The issue is discussed in the case of a debtor from Praia Grande (SP), who signed a contract with Caixa to pay for a property worth R$66,000, but failed to pay monthly installments of R$687.38. The debtor’s defense went to court to challenge the validity of Law 9,514/1997, a rule that established the extrajudicial execution of property in mutual fiduciary alienation contracts by the Real Estate Financial System (SFI).

According to the rules, the property is a guarantee for debt payment and can be taken by the bank in the event of default without a court decision. According to lawyers, the law does not allow for broad defense and contradictory proceedings, informed the Brazil Agency. For the rapporteur, even with the extrajudicial measure, the debtor can go to court to contest the charge and prevent the property from being taken.

In the minister’s assessment, fiduciary alienation allowed a “revolution” in the Brazilian real estate market. “The executive procedure provided for by law constitutes an appropriate measure in the legislative regulation of balancing the risks assumed by the creditor institution and preserving the debtor’s rights”, he stated.

Ministers Cristiano Zanin, André Mendonça, Alexandre de Moraes and Dias Toffoli followed Fux’s understanding. The trial was suspended and the other ministers will vote in this Thursday’s session (26). During the trial, the Brazilian Federation of Banks (Febraban) defended the fiduciary alienation model and stated that the guarantee allows the payment of lower interest compared to other operations.

According to lawyer Gustavo César de Souza Mourão, representative of the entity, there are around 7 million real estate loan contracts in this modality, a number that represents R$730 billion negotiated. “The average interest rate on real estate contacts secured by chattel mortgage is lower than those on equivalent transactions,” he stated.

On the other hand, the Union’s public defender Gustavo Zortéa da Silva defended the debtors and stated that the law leaves no room for contradictions and reduces the consumer’s powers. “There is no space to present reasons that could question the amounts demanded by the creditor or to mischaracterize the delay. Either the amounts required by the creditor are paid or the property is consolidated in favor of the creditor,” he stated. Febraban and the DPU participated in the trial as “amicus curiae“.