The interest rate on payroll-deductible loans for Brazilian retirees and pensioners stays capped at 1.85% a month, and the power to set that ceiling remains with the INSS, the government institute that pays Brazil's social security benefits. The Supreme Federal Court (STF) ruled unanimously, in a virtual session that ended on August 28, that the institute can keep limiting rates on this type of credit. In practical terms, nothing changes in retirees' pockets for now: the court only confirmed who is allowed to move the cap.
The ruling closed ADI 7759, a constitutional challenge filed in 2024 by the ABBC, an association of Brazilian banks. The suit targeted part of article 6 of law 10.820 of 2003, which created the payroll loan and lets the INSS, after hearing the National Social Security Council (CNPS), set a rate ceiling. The banks wanted rates to be set by the National Monetary Council (CMN), the body that regulates Brazil's financial system, and argued the rule violated the principles of legality, free enterprise and free competition.
The winning opinion came from the case's rapporteur, Justice Kassio Nunes Marques, and the other justices followed him. In the vote, as summarized by the court's press office, the rate cap stands as a "mechanism to protect the vulnerable consumer", not arbitrary interference in business. He also rejected the claim that a complementary law was required and the alleged violation of free enterprise, since the rule does not ban banks from lending or grant exclusivity to any single player.
How it works: the consignado is a loan repaid through installments automatically deducted from the borrower's pension or retirement check before the money reaches the account. Because default risk is close to zero, it carries the lowest rates in the Brazilian market: at the current cap, a balance of R$ 1,000 generates R$ 18.50 in interest per month. The payroll credit card has a ceiling of 2.46% a month, and recipients of the BPC, an assistance benefit of up to one minimum wage, are also eligible, according to Folha.
How the fight started
The association sued in 2024, after Carlos Lupi, then the social security minister, began cutting the cap every time the Selic, Brazil's benchmark interest rate, fell, Folha reports. At the time, banks briefly stopped offering the loans, and President Lula had to step in over the decision.
With the ruling, the INSS, after consulting the CNPS, keeps the power to review the ceilings, now at 1.85% a month for the loan and 2.46% for the card. The 0.61 percentage point gap between the two limits equals R$ 61 a month on a R$ 10,000 balance. The decision ends, for now, the banks' judicial attempt to hand rate control to the CMN.