Court overrules decision suspending payroll loans during pandemic

Court overrules decision suspending payroll loans during pandemic
Photo: Central Bank

An appellate judge has suspended a decision ordering banks to suspend payments of payroll loans to retired workers. According to the new judgment, it is not up to the judicial system to interfere with monetary policy as it is the sole domain of the Central Bank. “Interference from courts with the monetary policy is only justified in exceptional situations — and when authorities are unable to perform their duties.”

According to the lawsuit that motivated the first judgment, retired workers’ debts amount to almost BRL 1.4 billion (USD 255 million), with monthly payroll deductions amounting to BRL 1.1 billion.

According to the Brazilian Federation of Banks, payroll taxes with the National Social Security Institute (INSS) amount to BRL 142 billion. “Monthly, new payroll loans raise BRL 7 billion to pensioners and retirees, making them an important revenue source for these populations,” says the federation in a statement. “Suspending this type of loan would have a negative unintended impact, as it would deprive retired workers of an important source of income.”