Abusive interest rates are a frequent issue in loan agreements, financing, and credit card terms.
Identifying abusive situations and comprehending the workings of judicial review can provide protection for consumers and attorneys specializing in this field.
We will examine the key laws and elements of this topic to aid lawyers in their review efforts.
What is considered excessive interest?
Contracts with excessively high interest rates are used, surpassing the typical market rates.
These high interest rates make contracts too expensive and leave consumers in a precarious situation, going against consumer law principles like fairness and equal terms in contracts.
In Brazil, there is no specified maximum limit for interest rates according to the Superinvited Law, which is responsible for protecting consumers in difficult situations.
Some Brazilian laws allow consumers to legally challenge contracts with unfair interest rates, aiming to restore balance in contractual relationships and protect consumer rights.
Below, we will explore how these legal mechanisms can be utilized to establish a benchmark for determining the “normality” of interest accrual.
What is the most effective way to structure my files and procedures?
When does the interest rate become excessive?
There are no legal restrictions on the limit, as mentioned before.
It is possible to determine if the interest rate is deemed excessive in certain circumstances.
Consumer Protection Law
Contractual terms that unfairly disadvantage the consumer are deemed invalid under Article 51(1) of the Consumer Defense Code.
The CDC stresses the importance of being transparent and acting in good faith in consumer interactions to prevent interest rates from being unclear and potentially abusive due to economic power.
S.T.S. 297 states that Financial Institutions must follow the directives of the CDC during their operations.
Usury Law (Decree number 22,626/33)
Interest charges higher than twice the legal rate are only permitted for basic contracts signed between individuals, as stated in Article 1 of Decree no. 22.626/33.
Central Bank Regulation – Regulation by the Central Bank
The Central Bank (Bacen) is in charge of sharing the average interest rate used by financial institutions in various credit types, including financing contracts.
Identifying potential signs of abusive interest can be helpful.
STJ Legal Precedents
The Superior Court of Justice (STJ) considers rates above one and a half times, double, or triple the market average at the time of the contract or credit approval to be potentially abusive.
(REsp 1.061.530/RS, Second Section, Minister Nancy Andrighi, Official Gazette dated 10.03.2009, p. 24)
Identifying signs of exploitative interest in contracts.
To recognize harmful interest, it is crucial to implement a methodical strategy.
- View the typical market price.
The Central Bank frequently publishes the average interest rates for various credit types.
It is important to compare the contractual rates with this reference to check for significant deviations.
- Examine terms in contracts.
Ensure that all terms and fees are clearly outlined to prevent unexpected situations later on.
Ambiguous language or missing information could suggest potential abuse.
- Assess cost efficiency.
If the expenses outweigh the benefits in the contract, it could indicate potential exploitation of the party’s interests.
- Seek advice from a specialist.
Lawyers who specialize in banking and consumer law are essential for a thorough analysis and to help gather evidence for any legal action review.
Abusive interest rates on credit cards
Credit cards in Brazil have some of the most elevated interest rates globally, frequently surpassing 300% annually, as reported by Trade News.
Administrators’ lack of transparency, often failing to provide sufficient details about the fees, can make the situation worse.
It is crucial 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, capping the total debt at double the original amount borrowed.
Financing with excessive interest rates
Banks and finance companies often include terms in financing agreements for vehicles and real estate that can increase the overall cost of long-term contracts.
It is best to always stay alert to the average rate provided by Bacen to avoid interest exceeding the ones approved in consistent legal cases.
Excessive interest rates on loans
Personal and consigned loans are frequently subjected to unfair practices.
It is important to verify if the interest deducted directly from the paycheck in consignment agreements complies with the current regulations.
Lawyers are advised to use financial spreadsheets to assess how interest rates affect the total amount owed in cases under review.
Communication with the bank or financial institution should be recorded to support the previous effort to find an amicable resolution, if needed.
Excessive interest in legal debt
Law number 14,905/2025 introduced various modifications to how moratorium interest is collected on court debts.
One measure involves setting a legal interest rate based on the Selic rate minus the IPCA.
How does the process of reviewing contracts function in instances of excessive interest rates?
The contractual review is a legal tool that enables adjustments to clauses deemed unfair, ensuring a fair balance of rights and obligations between the parties.
This kind of intervention is crucial for individuals experiencing financial challenges due to high interest rates, and it goes through various legal procedures.
Contractual review is not solely focused on lowering interest rates, an important aspect to keep in mind.
Clauses that impose unreasonably high fines, excessive fees, or unfair practices may also undergo evaluation.
Revisional action not only safeguards consumers from harmful practices but also ensures a fair and equitable fulfillment of obligations by the parties involved.
Check out our comprehensive article on “Debt Renegotiation” to learn more about it!
Protecting your rights is now more crucial than ever.
Understanding what abusive interest entails and being able to recognize them is crucial to ensure one’s rights are protected.
Contractual evaluation can be a potent method for readjusting contracts and preventing significant losses when supported by well-defined laws and positive legal decisions.
What do abusive interest rates refer to?
These rates are much higher than the typical market rates, putting the consumer at a considerable disadvantage.
How can I tell if I’m being charged excessive interest rates?
Compare the rates charged in relation to the market average and seek legal advice when reviewing the contract.
What is discussed in the law regarding excessive interest rates?
Brazilian laws have various regulations regarding excessive interest rates. One example is the Usury Act (Decree no. 22.626/33), which bans charging interest rates exceeding twice the legal limit in basic agreements among individuals. The Consumer Protection Code (CDC) invalidates terms that unfairly disadvantage consumers.
