Auxílio Brasil consignee already has pre-registration with interest of 79% per year

Unemployed and mother of four, Amanda Prado has had more than one loan application refused. The green light came when she had her registration pre-approved at a bank correspondent at Banco Pan, two weeks ago, to obtain payroll-deductible loans for beneficiaries of Auxílio Brasil.

The modality has not yet been released by the federal government, but beneficiaries are already receiving and accepting loan offers from banking correspondents. Large private banks should not offer this type of credit.

To simulate the loan, Amanda just had to provide her RG, CPF, bank account numbers and the benefit’s family code. Now, he awaits the sanction of the Jair Bolsonaro government (PL) to receive R$ 2,056 in his bank account. Within 24 months, it will pay installments of R$160 —discounted directly from the aid—at interest of 4.99% per month (79% per year).

“I wanted to take out this loan so I could buy things for my children, clothes they need and things for the house. I’m having a lot of trouble,” he said.

According to government sources, the trend is for the loan term to be up to two years. As for the maximum interest limit, the topic is under discussion. The objective, according to government officials interviewed by the Sheetis that there is competition between banks to make interest rates less burdensome to customers.

Amanda, who saw the ad made by a friend and contacted her in search of financial help, says she did not think about the possibility of losing the social benefit before having paid off the debt.

“With this money, I’ll be able to buy things for my children and I’ll work, I’ll see if I can save some of what I earn from the odd jobs so I can support myself,” he added.

Under the proposal approved in Congress, these families can commit up to 40% of Auxílio Brasil to loans. This amount is equivalent to BRL 160 over the current BRL 400. When the benefit rises to BRL 600 from August to December, the limit goes to BRL 240 — this means that, when Auxílio Brasil returns to BRL 400, in January, the income commitment will rise to 60%.

Consumer protection organizations and financial experts believe that offering the product can lead these families into over-indebtedness and put them back in a vulnerable situation.

One concern is interest rates, which should remain practically at the same level as personal credit without payroll deduction (currently at 87% per year). They will also be closer to the overdraft (133% per year) than to the payroll for INSS beneficiaries, which is around 25% per year.

This is because people who receive the aid do not have a lifetime income, but a temporary benefit. That is, they may stop receiving payment if they no longer meet government criteria. The debt, however, remains. Therefore, the guarantees for the banks are smaller.

Ione Amorim, economist and coordinator of the Financial Services Program at Idec (consumer defense institute), says that the argument that the line is a cheaper credit option for these families is not supported.

“The people [Idec] has received a lot of criticism saying that it has to guarantee the right to low-cost credit. As if he had some cheap credit in Brazil. The one that will be made available for Auxílio Brasil, which can reach 100% per year, is very expensive”, says the economist.

With this rate, the advance of up to R$2,400, as has been announced by some finance companies, can cost practically twice as much for the beneficiary and compromise their income for up to two years.

​Ione also recalls that these families will not have the option of deferring a payment in the event of a financial squeeze, as with a debtor of other lines, as the discount is made directly on the aid.

“While the government grants the benefit, it transfers 40% of this amount to the banking sector. So these families will continue to be in a vulnerable situation”, he says.

The president of Abefin ​​(Brazilian Association of Financial Education Professionals), Reinaldo Domingos, says that INSS beneficiaries who earn the minimum wage and have a lifetime income already face difficulties in living with this income commitment, a situation that is aggravated in the case of the aid.

Taking the credit is only valid, according to him, for those who have the prospect of being able to live with a benefit of R$360 until December and R$160 per month from January onwards.

“Consigned credit, instead of benefit, can be a great villain in this story. [essas famílias] to a much worse situation than they already are. A survival benefit can never have any value being discounted,” he says.