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Little by little, the country is realizing the extent of the impact of the health crisis on the economy. Since the beginning of the pandemic, millions of jobs have been lost and thousands of companies have been affected and even closed down. The more we work together to improve the institutional environment, the faster we will leave the recessionary valley.

Society has shown maturity in facing up to the debate on structural reforms and macroeconomic. It's time to look at the reforms too microeconomic, These are measures that seek to improve the rules of the game and produce the right incentives for consumers and companies. Bill 3.515, which has been going through Congress for more than eight years - the last five in the Chamber of Deputies - is a good example of a measure with the potential to improve the economic environment, as it addresses a very sensitive issue: the over-indebtedness of families.

Even with alarming figures for default and indebtedness, Brazil still lacks legislation to deal with this issue. According to data from the credit sector, the country has almost 65 million people in default, which represents something like 41% of the adult population. But denial of credit is the first sign of difficulty and, in many cases, can prevent consumers from falling into over-indebtedness. 

To give you an idea of the size of the over-indebtedness, A study based on data from the Cadastro Positivo revealed that Brazilians commit around 30% of their income to credit cards alone. And it showed that this percentage reaches almost 61% in the lower income brackets.  

With the economic consequences of the pandemic, the number of people in debt and with a negative credit rating is expected to grow, further affecting household consumption. This scenario shows the urgency of finding a solution that both relieves the situation of consumers and maintains the confidence of credit providers.

Bill 3.515 defines over-indebtedness as the situation in which the consumer, in order to be able to honor all their consumer debts, ends up compromising the minimum necessary for their subsistence. 

In practice, this bill proposes an update to the Consumer Defense Code, opening up the possibility for over-indebted people to request a debt renegotiation process involving all their creditors. For consumers, the text under discussion provides for a maximum period of five years for settling debts. For creditors, the agreement provides for a guarantee of at least the payment of the principal, adjusted by official inflation indices.

Understanding that prevention is always the best remedy, the proposal establishes that it will be up to the credit provider to inform about the effective cost of the operations and the expected charges in the event of delay. At the same time, the creditor will have to assess the contractor's ability to pay, using information provided by customers and consulting credit protection databases, in order to make the concession safer. Generating data intelligence in credit analysis is key to changing the culture of the relationship between creditor and consumer.

The bill also prohibits the practice of pressuring consumers to purchase goods, services or credit. In the chapter on prevention, the text is in line with a trend that is beginning to take hold in Brazil: valuing financial education, which ensures that access to financial resources is done in a sustainable and healthy way. Without compromising the whole, a definition of what the existential minimum is, preferably based on objective indicators, is something that can remove the shadow of legal uncertainty. 

The world has been discussing these issues for a long time. At the beginning of the last decade, a World Bank task force pointed out that excessive household debt entails systemic and macroeconomic risks, bringing to mind the 2008 financial crisis.

Over here, the last few years have been marked by advances in the functioning of the credit market. We can mention the creation of payroll loans, the new judicial reorganization law, which expanded the supply of credit for legal entities and reduced the number of bankruptcies, the Simple Credit Companies Law, not to mention new entrants like the fintechs and, more recently, the approval of the Positive Registry. But we need to go further.

More than a palliative for getting through the crisis, the PL 3.515 The aim is to guarantee payment to creditors at all times and, at the other end, to rehabilitate the consumption of families facing insolvency so that they can once again exercise their full citizenship.

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor