Law no 14,905/2024 introduced significant modifications to the regulations regarding monetary adjustment and interest rates for legal and contractual debts in Brazil.
This text will examine the implementation of the new regulations regarding civil debts and its practical implications for attorneys and their clients.
How were the qualifying debts updated prior to Law No. 14,905/2024?
Before Law No. 14,905/2024, there were issues with consistency and legal certainty in updating civil debts.
There was no uniform index, leading to courts using various references.
- INPC/IBGE refers to the national consumer price index.
- IGP-M/FGV is a metric utilized in particular agreements like leases.
- IPCA-E/IBGE is utilized in certain legal proceedings for adjustments.
These discrepancies led to uncertainty among creditors and debtors, as well as prolonging legal conflicts over the most suitable index to use.
There was a debate about which interest rate to apply: either 1% per month (traditional moratoriums) or the SELIC Fee utilized in tax responsibilities.
What is the content of Law 14,905/2024?
Law No 14,905/2024 seeks to establish a uniform process for updating currency and interest rates on qualifying debts, promoting greater predictability and legal assurance.
The primary modifications consist of:
Fixing the utilization of the IPCA/IBGE index in cases of failure to meet obligations
The initial significant modification made by the legislation was the insertion of a new paragraph into Article 389 of the Civil Code (CC).
In the absence of a specific contract provision, the IPCA/IBGE index will be utilized for monetary adjustments.
This index is a trusted indicator of purchasing power that shows the overall inflation.
Articles 395, 404, 418, and 772 of the Civil Code, which previously permitted the use of officially established indices, were revised to eliminate this provision.
The IPCA/IBGE index is now considered the norm. Compare the previous and current articles for more information.
If the obligation is not met, the debtor is responsible for losses and damages, in addition to interest, monetary adjustments based on official indices, and legal fees.
If the obligation is not met, the debtor is responsible for losses, damages, interest, monetary adjustments, and legal fees, as stated in Article 389 of the Civil Code with the new wording.
If the monetary update index is not established or anticipated in specific legislation, the change will be based on the National Consumer Price Index (IPCA) published by the Brazilian Institute of Geography and Statistics (IBGE), or its successor.
The debtor is responsible for the harm caused by their actions, as well as interest, adjustments in monetary values based on official rates, and legal fees.
The debtor is responsible for any damage they cause, along with interest, updated monetary values, and attorney’s fees, according to the new wording of Article 395 of the Civil Code.
Losses and damages in cash payment obligations will be paid with monetary updates based on official indices, including interest, costs, and attorney’s fees, without affecting any contractual penalties.
Losses and damages in obligations for cash payment will be compensated with monetary adjustments, interest, expenses, and legal fees according to the new wording of Article 404 of the Civil Code, in addition to any agreed-upon penalties.
If the party who provided the trawlers did not fulfill the contract, the other party can keep them by default; if the failure to perform is on the part of the recipient of the trawlers, the provider can demand their return along with compensation, including monetary updates, interest, and legal fees.
In cases where the contract is not fulfilled as specified.
The recipient of the items can request their return, along with compensation for their value, monetary adjustments, interest, and legal fees, from the person who originally gave them.
The insurer must update the indemnity payment according to official indices, in addition to paying moratorium interest.
The insurer must update the compensation amount when paying the claim, in addition to paying any applicable late interest.
Interest calculation for legal fees fixing
Law No. 14,905/2024 also made changes to Article 406 of the Civil Code.
Moratorium interest will be calculated using the SELIC rate minus the IPCA if there is no specific contract provision.
The new regulation also covers situations specified by law or when interest is agreed upon without any charge.
The National Monetary Council will determine the calculation method and its implementation, with negative results being treated as zero.
Art. 406 was modified, leading to changes in Arts. 591 and 1,336 to accommodate the new legal interest rate.
Let’s take a look:
When there is uncertainty, lack of agreement, or when determined by the law, interest will be determined based on the legal rate.
The legal fee will be based on the Selic referential rate, minus the monetary adjustment index mentioned in Article 389.
The National Monetary Council will establish and publish the methodology for determining the official interest rate and its application form.
If the legal fee is less than zero, it will be treated as zero when calculating interest for the specified period.
Interest is assumed due to the mutual economic purpose and must not exceed the rate specified in Article 406, with annual capitalization permitted, as stated in Article 591 of the Civil Code, which has been revoked.
Interest is presumed when focusing on shared economic goals, according to the new wording of Article 591 of the Civil Code.
If the interest rate is not used, the legal fee specified in Article 406 of this Code will be applicable.
The responsibilities of the condo owner include…
The dominant tenant who fails to make their payment will face the agreed moratorium interest or, if not specified, a penalty of one percent per month and a fine of up to two percent on the outstanding balance.
The condo owner has certain responsibilities as stated in Article 1.336 of the Civil Code, with a new wording.
Contras that fail to make their payment will face a financial penalty, including interest charges and a fine of up to 2% on the outstanding amount.
Article 4 of Law No14,905/2024 states that the Central Bank will create an interactive app for simulating the legal interest rate.
Exceptions to Decree No 22.626, which regulates interest rates in contracts
Law No 14,905/2024 states that Decree No 22,626/1933 regarding interest in contracts does not apply to particular circumstances as outlined in Art. 3.
Examine each one of them.
The regulations outlined in Decree No. 22.626, dated April 7, 1933, do not pertain to responsibilities as per Article 3 of Law No. 14.905/2024.
Contracts made between legal entities;
II – indicated by credit securities or securities.
III – agreed upon previously
Financial institutions and other authorized institutions can operate under the Central Bank of Brazil.
(b) money or investment groups.
Merchant leasing firms and basic credit companies.
Civil society organizations that operate under Law No. 9.790 of March 23, 1999 and focus on providing credit.
Conducted in the financial, capital, or securities markets.
This enables the collection of compound interest and rates that surpass the previous limit, providing more flexibility for contract negotiations in business settings.
Changes that create a sense of certainty
Law number 14,905/2024 is a major step forward for the Brazilian legal system, offering increased safety and certainty in contractual and judicial matters.
The new law promotes more balanced negotiations between parties by standardizing monetary adjustments and interest rates, making it crucial for lawyers to comprehend these modifications to advise clients effectively and avoid legal disputes.
When will Law 14905 of 2024 come into effect?
Law No 14,905/2024 became effective 60 days after being published in the Official Gazette of the Union on July 1, 2024, initiating on September 1, 2024.
What is the interest rate specified in the Civil Code?
The legal interest rate is now defined as the SELIC Fee minus the IPCA for the same period, under Law 14,905/2024.
What is the current standard practice for applying interest rates and judicial monetary correction in private law relationships following law 14.905/2024?
In the absence of a contractual forecast, monetary corrections will typically be based on the IPCA/IBGE index, which represents official inflation. It is essential to consider any specific regulations that apply to particular legal relationships.
Mortal interest will be determined using the SELIC rate, minus the IPCA for that period.
