R$ 150 billion. That is the amount of household debt Brazil's federal government wants to renegotiate under Desenrola 3.0, launched on Friday (25) by President Luiz Inácio Lula da Silva at an event in São Paulo. For consumers stuck with credit card bills years overdue, the plan opens a path to clear their names and pay far less than they owe.

The program covers personal debts overdue for two to four and a half years in two categories: credit card balances, in both installment and revolving form, and personal loans without payroll deduction, the kind the borrower repays directly to the bank. Planning Minister Bruno Moretti said each debt must be worth up to R$ 10,000, the size of a card bill that swallows several months of a family's income.

The government estimates R$ 300 billion in eligible debts in these credit types and aims to reach half of that total. The proposal is to buy the portfolios from banks at a 90% discount, at an estimated cost of about R$ 15 billion. It is as if the state paid R$ 1,000 for a R$ 10,000 debt.

In plain terms: the discount, called deságio in Portuguese, is a cut applied to the face value of a debt. By buying a credit portfolio, Brazil's National Treasury acquires thousands of overdue loans in one block instead of negotiating case by case. The bigger the discount, the smaller the debtor's final bill, since Moretti said the savings will be passed on to families.

The auction to buy the portfolios is scheduled for November, and the operation will be run by the Treasury or a federal financial institution. Banks willing to sell submit offers, and the one accepting the largest discount wins. "We are talking about clearing 150 billion in debt from this portfolio, it is very strong, very powerful so these families can start over," Moretti said, according to G1.

What changes from earlier rounds

This is the third round of Desenrola, the government's program for renegotiating household debt. Earlier rounds covered overdue card, overdraft and personal loan debts of 90 days to two years, and each borrower negotiated alone with the bank. Now the state buys the debts in bulk, with the federal government "acquiring debt portfolios from financial institutions," Moretti explained.

According to InfoMoney, the consumer's name comes off delinquency registries as soon as the government buys the debt. The borrower then renegotiates directly with the Treasury, with lower interest and installments matched to income bracket.

The provisional measure, a presidential decree with immediate effect that Congress must later approve, also instructs the Central Bank to tighten rules on consumer lending to keep families from falling back into debt. "People get out of step, take on debt in a disorderly way and then cannot sort themselves out," Lula said, criticizing banks that hand "4, 5, 6 credit cards" to people already in the red. The package was announced at the same event where the government banned online betting, nine days before Brazil's presidential election.