As Brazil grapples with having 63 million of its population in debt, the National Monetary Council continues to take steps to slash default rates. Now, the council has nearly halved interest rates on overdraft credit. Starting on January 6, 2020, Brazilian banks will not be allowed to charge more than 8 percent a month for overdraft fees—bringing annual interest down to 150 percent.
The Central Bank says the move will help correct a major distortion in Brazil’s financial system, as this form of credit is used by people with less financial education and lower income. On the other hand, regulators allowed banks to charge monthly tariffs of 0.25 percent on overdraft limits higher than BRL 500.
Good news for consumers? Maybe. But certainly not for banks.