Authorities releases discounting Brazil Support for payroll and doesn’t restrict curiosity

President Jair Bolsonaro (PL) today published a decree that regulates some points of the payroll loan for beneficiaries of Auxílio Brasil and BPC (Benefício de Prestação Continuada), such as the authorization for the Union to deduct the benefit to pay the installments to the bank and the definition that she has no responsibility in case of non-payment of the loan.

The decree, however, does not establish when the loan will begin nor does it create limits for the collection of interest by banks, as in the case of payroll loans for retirees, for example, which has a ceiling of 2.14% per month. Banks that are already announcing the payroll loan for those who win Auxílio Brasil charge interest up to three times higher than that of payroll loans in the market, such as those for retirees or civil servants. In July, the UOL simulated loan conditions in which the rate reached 5.85% per month —almost 100% per year.

When will I be able to apply for a loan from Auxílio Brasil? The decree did not define when the loan could be made available by banks and financial institutions. The text says that the Ministry of Citizenship should publish other rules with details of the loan, such as which benefits can be excluded from the calculation basis at the time of debt discount.

According to the government, banks must provide “information, training and alerts, with a view to promoting the financial education of the responsible family beneficiary prior to contracting the loan”. These rules will also be regulated by the Ministry of Citizenship.

How much will I be able to borrow? In the decree, the government states that the discount on the loan payment cannot be greater than 40% of the total benefit. This limit includes other borrowings taken before the new law was regulated.

The Ministry of Citizenship informed that the limit is 40% of the permanent amount of R$ 400 of Auxílio Brasil — since the Aid of R$ 600 is valid only until December. In practice, people will only be able to have a discount of up to R$ 160 per month in the benefit to pay the debt.

The government also states that the responsibility for the payment of the loans to the banks will be “direct and exclusive of the beneficiary” and that the “Union will not be held responsible in any case”.

What precautions to take with the loan? Although credit is not yet available, there are already payroll loan offers circulating, with pre-registration for banks to actually release the money after regulation.

The law says that, before closing a contract, banks must provide the user with a document showing the amount that will remain from Auxílio Brasil after deducting the monthly installment of the loan. They will also have to inform the interest rate that will be applied, the total cost of the loan and the payment term.

But you have to be careful because the interest rates charged are high. In July, UOL showed that they reach almost 100% per year. The beneficiary must assess whether it is worth taking the loan, to avoid accumulating debts and even to avoid compromising the family’s livelihood. Remember that the debt payment is automatically deducted from the benefit, that is, there is no option not to pay.

‘Ideal is not to take it’, says Bolsonaro

The creation of the Auxílio Brasil payroll loan is criticized by finance experts, who highlight the risk of over-indebtedness and financial difficulties when offering credit to a very low-income population in a situation of social vulnerability.

“The ideal is not to take a loan, but there are people who need to take it to pay off other debts, to pay a lower interest (sic)”, he said in an interview with the Flow Podcast on Monday (8).

Source: Uol