Law No. 14.905/24, passed on July 1, 2024, amended the Civil Code to standardize the rules on monetary correction and interest rates in civil, judicial or extrajudicial obligations. Most of these changes will come into force within 60 days of the publication of the new law.
In short, the main changes are:
- Monetary restatement index: in the absence of a specific contractual or legal provision, the IPCA (Broad National Consumer Price Index) will be applied, or the index that eventually replaces it.
- Interest rate: in the absence of a specific contractual or legal provision, the Selic rate (Special Settlement and Custody System) will be applied, less the IPCA. If the result is negative, the rate will be considered zero. The method of calculation and its application will still be defined by the National Monetary Council and published by the Central Bank.
- Flexibility of the Usury Law: the new law removes the application of Decree 22.626/33 (Usury Law) in certain situations, such as loan contracts for economic purposes, contracts between legal entities, debts represented by credit securities and contracted with financial institutions, for example. In other words, in these cases the parties are free to agree to interest rates even higher than double the legal rate and to charge compound interest (interest on interest).
These changes resolve the controversy that was being discussed in the Superior Court of Justice (STJ) over the application of the Selic rate in civil contracts. The STJ had been deciding to apply the Selic rate, but there was disagreement over the possibility of deducting the IPCA. The new law pacified the understanding by establishing the application of the Selic rate less the IPCA.
The new rule aims to bring more legal certainty and predictability to contracts, establishing clear and uniform criteria for monetary restatement and interest. It is hoped that this will reduce the legalization of conflicts and speed up the resolution of disputes.
Although at first it may represent a relief for debtors, since the interest rate to be applied will generally be lower than that previously practiced, it is necessary to be alert to the loopholes allowed by relaxing the application of the Usury Law, which could have the opposite impact.
Finally, it is important to note that the law does not automatically modify existing contracts, which continue to be governed by the rules in force at the time they were signed. For this reason, it will be necessary to review the agreed terms if the parties wish to adapt to the new rules. As for court sentences, as soon as the law comes into force these new parameters can already be used.
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