High interest rates are a frequent issue in loan agreements, financing, and credit card terms.
Understanding how the legal system operates can safeguard consumers and attorneys dealing with abusive situations.
We will examine the key laws and elements of this topic to support lawyers in their review efforts.
What do abusive interest refer to?
Contracts with excessively high interest rates are imposed, surpassing the typical market rates.
These charges not only make agreements more expensive but also place the buyer in a precarious situation, going against key aspects of consumer protection laws like fairness and equitable contracts.
In Brazil, there is no specified legal cap on interest rates, and even the Superinvited Law, which aims to protect consumers in difficult situations, does not set a specific limit on interest charges for this type of debt.
Some laws in Brazil allow consumers to challenge contracts with unfair interest rates in court, which helps restore balance in contracts and protect consumer rights.
Below, we will explore how these legal concepts can be utilized to establish a benchmark for what is considered “normal” in terms of interest collection.
When does the interest rate become excessive?
There is no legal limit as mentioned before.
It can be determined if the interest rate is deemed excessive in certain circumstances.
Consumer Protection Code (CDC) – Code for Consumer Protection
Contract clauses that unfairly disadvantage consumers are deemed invalid under Article 51(1) of the CDC.
The CDC stresses the importance of being transparent and acting in good faith when dealing with consumers, ensuring that interest rates are clearly presented and do not constitute an abuse of economic power.
S.T.S. 297 states that the CDC applies to Financial Institutions, requiring them to follow its guidelines during their activities.
Usury Law (Decree number 22,626/33)
Interest rates exceeding twice the legal limit established by Article 1 of Decree no. 22.626/33 are only permitted for basic contracts involving individuals.
Central Bank Regulation – Regulation by the Central Bank.
The Central Bank (Bacen) is in charge of publishing the average interest rates used by financial institutions in various credit types for financial transactions like financing contracts.
To assist in recognizing potential signs of abusive interest.
STJ Legal Precedents
The Superior Court of Justice (STJ) considers it abusive if interest rates are significantly higher than the market average at the time of the contract or credit approval.
REsp 1.061.530/RS, Second Section, Min. Rel. Nancy Andrighi, DJe of 10.03.2009, p. 24
Identifying abusive interest in contracts.
To pinpoint harmful interest rates, it is crucial to utilize a methodical method:
- View the typical market price.
The Central Bank frequently publishes the average interest rates for various credit products.
It is important to compare the contracted rates with this benchmark to check for notable differences.
- Examine contract provisions.
Ensure that all terms and fees are clearly outlined to prevent unexpected situations later on.
Using ambiguous language or leaving out important details could suggest that something is abusive.
- Assess cost-efficiency.
If the expenses outweigh the advantages in the contract, it could indicate exploitation of the party’s interests.
- Seek advice from a specialist.
Lawyers who specialize in banking and consumer law are essential for thorough analysis and aiding in gathering evidence for any review process.
Abusive Interest Rates on Credit Cards
Credit cards in Brazil have some of the highest interest rates globally, frequently surpassing 300% annually, as reported by Trade News.
Administrators’ lack of transparency can exacerbate the situation when they fail to provide sufficient information about the fees they impose.
It is essential to maintain well-organized documentation of all interactions with the card provider.
Law no. 14.690/2023 set a limit on interest charges for revolving credit, ensuring that the total debt does not exceed double the original amount borrowed.
Unfairly high interest rates on loans
Banks and financial institutions often include terms in financing agreements for vehicles and real estate that can make extended contracts costly.
It is best to remain vigilant of the average rate published by Bacen to avoid interest rates going above those allowed by established case law.
Loans with excessively high interest rates
Personal and consigned loans frequently experience unfair treatment.
It is important to verify if the interest deducted from the payroll in consigned contracts complies with the current regulations.
Lawyers are encouraged to use financial spreadsheets to determine how interest rates affect the total amount owed when preparing for legal actions.
Communication with the bank or financial institution should be documented to confirm previous efforts to find a friendly resolution, if needed.
Interest rates on court-ordered debts that are excessively high
Law No. 14,905/2025 introduced various modifications to how moratorium interest is collected on court debts.
A legal interest rate is set, which is based on the Selic Rate minus the IPCA.
How is the review of contracts conducted in situations involving exorbitant interest rates?
The contractual review is a legal tool that helps adjust unfair clauses to ensure a balance of rights and responsibilities between parties.
Consumers experiencing financial hardships due to high interest rates may find this kind of action crucial. The judicial process includes various steps.
The contractual review involves more than just lowering interest rates.
Clauses that are deemed excessive fines, disproportionate charges, or abusive practices may be reviewed.
Revisional action not only safeguards consumers from harmful practices but also fosters a fair and equitable fulfillment of obligations by all parties involved.
To learn more about “Debt Renegotiation,” read our complete article on the topic!
Protecting your rights is more crucial than ever before.
Understanding what abusive interest is and being able to recognize it is crucial to ensure one’s rights.
Contractual evaluation is a strong tool for readjusting contracts and preventing significant losses, thanks to well-defined laws and supportive legal decisions.
Frequently Asked Questions
What are excessive interest rates?
How can I determine if I’m being charged excessive interest rates?
What is discussed in the law regarding excessive interest rates?
Brazilian laws contain numerous regulations regarding excessive interest rates. For instance:
The Usury Act (Decree no. 22.626/33) forbids charging interest exceeding twice the legal rate in straightforward agreements among people.
The Consumer Protection Code (CDC) voids clauses that unfairly disadvantage consumers.