Entities from the retail sector and representatives of small traders will launch, this Tuesday (21), the manifesto “Parcelo Sim!“, in defense of interest-free installments on credit card purchases. At least 11 associations are part of the group, including the São Paulo Federation of Commerce of Goods, Services and Tourism (Fecomércio-SP) and the Brazilian Micro and Small Business Support Service (Sebrae).
The entities state that the modality is used by 75% of the population and 90% of retailers. If the model is taxed, 42% of Brazilians will reduce their spending by half. “The movement is non-partisan, but aims to sensitize political authorities from the Executive and Legislative branches to prevent the economically active population and retailers from being vilified by large banks,” the entities wrote in a manifesto.
The “Parcel Yes!“ is integrated, in addition to Fecomércio and Sebrae, by:
• Brazilian Association of Wholesalers and Distributors of Industrialized Products (Abad);
• Brazilian Association of Bars and Restaurants (Abrasel);
• Brazilian Association of Shopping Satellite Retailers (Ablos);
• Brazilian Association of Academies (Acad);
• Brás Shopkeepers Association (Alobras);
• National Confederation of Store Managers (CNDL);
• Pay instantly;
• Brazilian Consumer Protection Association (Proteste); It is
• Union of Shopkeepers on Rua 25 de Março and Surrounding Areas (Univinco).
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For Abrasel’s executive president, Paulo Solmucci Júnior, the medium is essential for the economy, commerce and low-income families. “Imagine not being able to count on the modality in emergency situations. The movement is purposeful, with the meeting of more than ten entities. We want to inform the population about the harmful consequences that a change in this product, which is the consumer’s favorite, can provoke. It is very important that everyone participates in the petition, so that together we can win this battle”, he explains.
The national president of Sebrae, Décio Lima, has a similar opinion. “Interest-free installments are good for those who buy and are good for those who sell. Most entrepreneurs use this modality to gain momentum in their working capital. For the poorest population, who need to buy food, medicine or household appliances, it is a tool of irreplaceable credit as it is the only interest-free one in the country. For all of this, we are together in the campaign in defense of interest-free installments. We are going to mobilize the population to participate in the petition in defense of this right. No one will touch the installments”, he states .
The director of Institutional Relations and Media at Proteste, Henrique Lian, highlights that consumers are the most sensitive part of the process. “The attempt by large banks to eliminate or limit interest-free installments is a compensation strategy for the reduction of exorbitant rates on revolving credit and a desperate search to regain competitive advantages over fintechs. Instead of competing for consumer preference, they just want maintain its profitability. I remember, however, that the State (Congress and National Monetary Council) has a constitutional obligation to defend consumers who are the most vulnerable market agents. And these, who always end up paying the bill, are never sufficiently heard and considered “, he defends.
The possibility of limiting this form of payment was mentioned for the first time by the president of the Central Bank, Roberto Campos Neto, in a Senate hearing in August. Since then, several entities have criticized the idea, such as the Brazilian Internet Association (Abranet). According to the institution, “purchases in installments are the driving force behind consumption in Brazil [50% do volume de cartões, que atinge R$ 1 trilhão ao ano, o equivalente a 10% do PIB]”.
Furthermore, the consumer association Proteste sent a note to the president of the National Monetary Council (CMN) and the Minister of Finance, Fernando Haddad, criticizing the end of interest-free installments.
“The entity clarifies that interest-free installments on credit cards have replaced, with more security, the credit system. Interest-free installments are a modality that, in practice, replaced the traditional credit system, in which installment purchase operations took place directly at the retail establishment chosen by the consumer for their purchases”, says the text.
Amid the debate, the federal government and the Central Bank are discussing ways to discourage interest-free installment purchases. These operations are considered by financial institutions as the root of the problem and a type of cross-subsidization. On the table is the adoption of an installment model that takes into account the type of asset to be purchased and the term of the operation.
Differentiation by product line would occur as follows: a durable good, such as a refrigerator, could be sold in a greater number of installments. A semi-durable item, such as clothing, would be sold within a shorter period of time.
The term of the operation would influence the interest rate. The model would work like a “ladder”, that is, the greater the number of installments, the higher the interest paid by the consumer. If the customer pays a card purchase in ten installments, for example, they will pay a certain fee. If the number of installments is smaller, the rate drops. This would take place within the logic of the market and competition between financial institutions, without any type of schedule.
These discussions occur in parallel with the likely extinction of the card’s revolving credit, which is activated every time the consumer pays only part of the bill by the due date. The line has average interest rates of 437% per year and default rates of 49%, according to June data.
With the end of this type of financing, the defaulting customer would be automatically directed to an installment system with more affordable rates.
Government sources, however, have doubts regarding the real effects of the end of the rotation, a measure announced by Campos Neto. The suspicion is that the extinction of the line will not lead to an effective reduction in interest rates by financial institutions.
The bottom line, according to these people, is the market power of the big banks, which continue to dominate the card segment, despite the recent increase in competition.
A final arrangement for this issue still depends on negotiations with retailers, who reject, for example, the possibility of differentiating deadlines by type of merchandise. “There are construction stores that sell household appliances and decoration items. Or supermarkets that sell white goods. It is not operational to do this segmentation by product line”, says Jorge Gonçalves Filho, president of the Institute for Retail Development (IDV).
Regarding interest-bearing installments, which could gain momentum in this new design, the expectation of commerce is that new forms of financing will be created. “If you are going to limit interest-free installments, we will need a credit card [parcelado com juros] more aggressive, with lower rates and longer terms”, says Gonçalves Filho.