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Brazil Senate to vote on capping credit card, overdraft interest

Brazil's Senate on Thursday will vote on a bill to limit interest rates charged on credit card debt and overdraft lines to help consumers reeling from fallout from the coronavirus pandemic, a move that could weigh on banks' 2020 profit.

By Maria Carolina Marcello and Marcela Ayres

BRASILIA, Aug 4 (Reuters) - Brazil's Senate on Thursday will vote on a bill to limit interest rates charged on credit card debt and overdraft lines to help consumers reeling from fallout from the coronavirus pandemic, a move that could weigh on banks' 2020 profit.

Lawmakers have proposed a cap on debt rolled over on credit cards and overdraft lines at 30% per year for all loans extended by banks between March and December. The current average interest rate for overdraft lines is 110% and for rolled-over credit card debt it stands at 300%.

Senator Alvaro Dias, who wrote the proposed bill, said the voting date was set in a Senate meeting Tuesday.

Brazil's economy minister found in an internal study that, if approved, the measures could hurt competition and favor the country's largest lenders, which have lower funding costs than smaller rivals such as financial technology startups.

The largest lenders are also more likely to partially offset less profitable overdraft and credit card lines with other products.

(Reporting by Maria Carolina Marcello and Marcela Ayres Writing by Carolina Mandl Editing by Brad Haynes and Leslie Adler)

((carolina.mandl@thomsonreuters.com; +55 11 5644 7703; +55 11 97116-3806;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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