Interest on aid salaries should be limited to Selic, Idec says

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Idec argues that the interest in the case of the payroll loan offered to the beneficiaries of Auxílio Brasil must be equal to the base interest rate





The government published on Thursday (4) the decree that deals with the offer of credit deductible from payslips to the beneficiaries of social programs, such as Auxílio Brasil, without limiting the interest rates that can be applied.

The Brazilian Institute for Consumer Defense (IDEC) argues that, to try to prevent credit from leading to over-indebtedness, public banks must be solely responsible for offering this type of credit, and that interest is limited to the Selic rate.

According to the coordinator of Idec’s Financial Services Program, Ione Amorim, the decree clearly favors financial institutions to the detriment of destitute families: “The Institute believes that to minimize these risks it is necessary to create a government fund to guarantee contracts executed under the ‘Auxílio Brasil. Given the interim nature of the program, the fund would aim to protect vulnerable consumers from limited access to basic consumer goods and over-indebtedness. In this proposal, the responsibility for Auxílio Brasil’s entire salary loan program would fall to a public bank, rather than Federal Savings Bank, who would be responsible for analyzing and issuing these credits, ”says the economist.

Furthermore, the guarantee fund would also have the objective of meeting any debts left by the beneficiaries who have left the social program or who cannot afford the continuity of the installments.

Banks can charge high interest on payroll loans

Another important point is the interest that will be applied to the payroll. The prospect is that with private banks this value will reach 79% and could rise up to 98% per year.

For Idec, with responsibility of Caixa, the interest must be much lower: “To prevent the program from becoming a measure for the transfer of social resources to banks, it is necessary limit interest to the level of 13.75% per annumthat is the equivalent of the Selic, base interest rate, and that its granting, given the nature of the credit, should not bring profits to the government financial institution ”, adds the coordinator.

Also in the statement, Idec says it understands that this would be the only way to make this payroll-deductible credit program less harmful to the beneficiaries of social programs, with fewer chances of borrowing.

In addition to preventing private banks profit from the population’s need for survival poorest Brazilian.

The Institute knows that private financial institutions are already prepared and have even initiated pre-contracts for this wage loan model, which makes it difficult at this time to change this scenario for public banks. It makes no sense to define a guarantee fund for private banks financed by the government.

There are already payroll loans with interest of 86% per year. According to the Ministry of Citizenship, “interest rates, payment terms, number of installments and grace period will be defined by the financial institutions registered to carry out the operation”.

Source: Terra

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