Main Changes in Law No. 10.406/02 amending the Civil Code

The project presented by the Ministry of Economy proposes a standardization of monetary restatement and the application of interest.

The recent change in the law governing the Civil Code establishes the debtor's obligation, in cases of default, to pay monetary restatement, interest and attorney's fees. In the absence of a contractual specification on the monetary restatement index, the IPCA (Broad National Consumer Price Index) or its substitute will be used.

Legal interest

Interest, when not previously agreed, will be determined by the legal rate, based on the Selic rate, less the IPCA. The methodology for calculating and applying this rate will be defined by the National Monetary Council, and a negative value will be considered zero.

Down payment

With regard to unfulfilled contracts, if the party who gave the down payment (arras) defaults, the other party can terminate the contract and retain the arras. If the party who received them defaults, the party who gave the deposits has the right to rescind the contract and demand the return of the deposits with monetary restatement, interest and legal fees.

Loans for economic purposes

In the case of a loan for economic purposes, where one party lends money to the other for productive activities, such as with banks or investors, interest is presumed to be charged, with the legal rate (Selic) applying in the absence of specification.

Insurance default and condominiums

The law also stipulates that in cases of default by the insurer, the latter must update the monetary value of the indemnity, in addition to paying interest on arrears.

Non-payment in condominiums will be subject to monetary correction, interest according to the legal rate (Selic) and a fine of up to 2%.

Exceptions to Decree 22.626/1933

The exceptions to Decree 22.626/1933, known as the "Usury Law", which prohibits charging interest at more than twice the legal rate per year and capitalizing interest, include contracts between legal entities, credit securities and certain financial institutions.

To make it easier to understand and apply the new rules, the Central Bank of Brazil will make available an interactive application to simulate the legal interest rate in everyday situations.

The law comes into force immediately for cases of non-agreed interest, which will be governed by the legal rate (Selic), while the other provisions will take effect 60 days after its official publication, on July 1, 2024.

Reflection on Changes in Legislation and Fairness in Interest Charging and Payment

Recent changes in legislation aim to standardize monetary restatement and the application of interest, ensuring greater transparency and fairness in contractual relations. These changes are important to ensure that debtors and creditors are aware of the financial charges resulting from default. However, this standardization raises a crucial question about the fairness of the government's treatment of taxpayers.

For example, the late payment penalty for taxes paid after the due date starts on the first day after the debt is due and is charged at 0.33% per day of delay, up to a limit of 20%. This means that if the delay exceeds 60 days, the fine reaches a maximum of 20% of the tax amount. This strictness in collection highlights the severity with which the government deals with taxpayers' delays.

However, it is essential to consider the symmetry of treatment when the government is the debtor. If the government collects taxes with strict interest and fines, it should apply the same fairness and speed when paying its debts to citizens. The application of monetary restatement and interest should be equally rigorous in both directions, ensuring that citizens receive refunds with fair correction and within the same parameters applied when collecting taxes.

Promoting a truly fair and balanced relationship between the state and taxpayers would strengthen trust in institutions and contribute to a healthier and more transparent economic environment. Fairness in the application of interest and fines is an essential step towards ensuring that everyone, government and citizens alike, are subject to the same rules of economic justice.