Over-indebtedness Law is sanctioned and updates the Consumer Defense Code and the Senior Citizens’ Statute

Briefly

On 2 July 2021, Federal Law No. 14.181/2021, known as the Over-indebtedness Law was sanctioned. The law updates the Consumer Defense Code (Federal Law No. 8.078/1990 (CDC)) and the Senior Citizens’ Statute (Federal Law No. 10.741/2003). After 10 years of discussion, this new law creates rules for the prevention, treatment and settlements in over-indebtedness, with five presidential vetoes.

Main rules

The law defines over-indebtedness as “the obvious impossibility of the consumer, as an individual, in good faith, to settle all their consumer payable and due debts without compromising their existential minimum.” The main rules determined by the new law are the following:

1) Prevention: One of the main determinations of the new law is to prevent over-indebtedness through responsible credit practices. The law contains provisions relating to the necessity of disclosing prior mandatory information about credit, mechanisms for controlling advertising and combating consumer harassment in credit, especially for the elderly, illiterate, sick or those in a state of aggravated vulnerability. In addition, there is now a specific provision for sanctions for noncompliance with the provisions on responsible credit.

2) Good faith: The law also addresses the improvement of good faith by suppliers in granting credits and collecting debts, creating rules that impose the necessity to adopt good faith practices by suppliers and credit intermediaries during contracting and at the time of debt collection.

3) Existential minimum: Another subject addressed by the new rule is the preservation of the existential minimum of the consumer when renegotiating debts and granting credits. This issue still awaits specific regulation. There was also an important presidential veto against a determination providing for a credit limit for payroll-deductible credit at a percentage of salary.

4) Reviewing and renegotiating debts: The law also provides for rules that ensure the new right of consumers to deal with over-indebtedness through the review and renegotiation of debts, which can be achieved in the form of conciliation and a payment plan, without implying complete debt forgiveness.

5) Conciliation: Finally, the law also institutes mechanisms for the judicial treatment of over-indebtedness, through the creation of centers for conciliation and mediation of conflicts arising from over-indebtedness. In cases where there is no voluntary conciliation, there is the possibility of appealing to a judge in a “proceeding for over-indebtedness to review and integrate contracts and renegotiate remaining debts,” which is carried out through a compulsory judicial payment plan.

Our strategic Consumer and Sustainability team is available to provide further information on the subject. Source: https://in.gov.br/en/web/dou/-/lei-n-14.181-de-1-de-julho-de-2021-329476499