April 28, 2010
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News: Brazilian Cardholders Look For Clarity
As they remain in the headlines this week, Brazilians should soon get what they have been asking for if new credit card rules are adopted by lawmakers. The new rules are aimed at protecting cardholders from existing and future predatory practices of credit card companies. According to Justice Minister Luiz Paulo Barreto, lawmakers have been asked to grant the National Monetary Council authority to oversee the card industry and establish rules that will limit card companies from imposing unjust and excessive interest rates and fees. The council which is headed by Finance Minister Guido Mantega would be responsible for negotiating with credit card companies with success or face more stringent regulations in the future.
In a recent news conference, Justice Minister Barreto told reporters that an emerging middle class has brought about rapid growth in the credit card industry which demands clarity and transparency in card contracts. Mantega said that the middle class has grown to 53 percent of the population in 2009; up from 42 percent in 2002. Also sparking the need for more stringent rules was Cielo and Redecard's postings of profits which were considered higher than deemed fair. Cielo is Brazil's largest credit card processor and Redecard follows second behind it. Additionally, the committee is responding to complaints by consumers who say card issuers have been unfairly raising interest rates and fees to unmanageable heights.
Experts believe that Brazil's credit card transactions will amount to over $305 billion in 2010 and continue to grow at an annual rate of 20 percent. The Brazilian Association of Credit Card and Service Companies (ABECS) is continuing talks with lawmakers and notes that card companies want to cooperate to assure new business is developed fairly. Under powerful forces of such rapid growth, a lack of clear boundaries and rules would lend itself to an out of control industry. Brazil authorities are not willing to let that happen. The Central Bank is expected to make its final report sometime next week.