Brazil's Senate approves cap on overdraft, credit card interest
- The current average interest rate for overdraft lines is 110% and for rolled-over credit card debt it stands at 300%.
- Brazil's lower house still has to vote on the bill.
BRASILIA/SAO PAULO: Brazil's Senate approved on Thursday evening a bill to limit interest rates charged on credit card debt and overdraft lines, a move aimed at helping consumers suffering the fallout from the COVID-19 pandemic, but that could weigh on banks' 2020 profit.
Lawmakers proposed a cap of 30% per year on debt rolled over on credit cards and overdrafts for all loans extended by banks from March until the end of state of emergency declared by Brazil's government.
The current average interest rate for overdraft lines is 110% and for rolled-over credit card debt it stands at 300%.
Brazil's lower house still has to vote on the bill.
Brazil's banking industry association Febraban said in a statement that it is worried about potential "artificial intervention," which could lead to lower loan offer and economic side effects.
"It is important that banks keep healthy, not just now, but mainly in the future to help in the economic recovery," Febraban said.
Following Senate approval of the bill, shares in Brazil's biggest lenders, such as Banco Bradesco SA, Itau Unibanco Holding SA and Banco Santander Brasil SA , were down more than 1% in morning trading, underperforming the country's stock exchange index.
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