Banking contract clauses have been the subject of increasing scrutiny within the Brazilian legal landscape, especially concerning the abusiveness of certain provisions. Among the main issues generating controversy in contractual relationships between consumers and financial institutions are abusive interest rates, interest capitalization, and the judicial review of contract clauses.
The trend in judicial interpretation has evolved to protect consumers from such practices, aligning with new demands in the financial market and the need for balance in contractual relationships. This article analyzes the key issues regarding abusive banking clauses, particularly in light of recent judicial precedents.
Abusive Interest Rates: A Recurring Issue in Banking Relationships
The imposition of excessive interest rates is one of the most debated practices concerning banking contract clauses. Traditionally, banking contracts are governed by terms unilaterally imposed by financial institutions, often including high interest rates that create a significant imbalance in the relationship between banks and consumers.
The Brazilian Consumer Protection Code (CDC) and the Civil Code require that contractual clauses be written clearly and precisely, respecting the principles of good faith and the social function of the contract. However, in practice, consumers often do not fully understand the terms, especially those related to interest rates, which are frequently deemed abusive.
Abusive interest rates are those that exceed reasonable limits, placing an excessive burden on the borrower. In Brazil, interest rates are regulated by the Central Bank, but financial institutions often set conditions that, while technically legal, are disproportionate to the consumer’s economic reality.
Thus, abusiveness is not limited to interest rates exceeding the Central Bank’s ceilings but also includes those that are disproportionate to the contractual context and the customer’s ability to pay. Charging interest significantly above market averages without plausible justification is considered abusive.
Interest Capitalization: Legal Permissions and Limits
Interest capitalization, also known as “compound interest,” refers to charging interest on a balance that already includes accrued interest — a practice that can exponentially increase the debt over time.
Initially, the Usury Law (Decree No. 22.626/33) prohibited interest capitalization in banking contracts. However, as the financial system evolved, the Superior Court of Justice (STJ) allowed interest capitalization, provided it is expressly stated in the contract and applied on a monthly basis, not exceeding 12 times per year, in line with Central Bank regulations.
Courts now interpret interest capitalization clauses more strictly, ensuring they are clearly explained to consumers and that the rates used are proportionate to market conditions.
Even when permitted, interest capitalization can still be deemed abusive if it imposes an excessive burden on the consumer — for example, when the practice is not properly disclosed or when applied monthly without transparency. Valid capitalization requires clear explanation of the terms and informed consent from the consumer regarding the financial impact of the practice.
Contract Review: Consumer Protection and the Role of the Judiciary
The judicial review of banking contract clauses — especially concerning abusive interest rates and interest capitalization — is a key tool to ensure fairness in consumer-bank relationships. It is grounded in the principles of consumer protection and good faith.
The Brazilian Civil Code, in Article 421, states that contractual freedom must be exercised within the limits of the social function of the contract. This means that in establishing a contract, the parties must consider not only their own interests but also the social impact of the contract’s terms.
In banking, the social function of contracts implies that terms cannot be disproportionate or unfair, placing the consumer at a significant disadvantage. Judicial review of abusive clauses aims to restore balance, ensuring contracts fulfill their social function in a fair manner.
Therefore, we can conclude that new judicial precedents — rooted in consumer protection and the social role of contracts — include imposing limits on abusive practices by financial institutions. Judicial review of contract clauses has become a vital tool for restoring balance in banking relationships, ensuring that contracts uphold the principles of good faith and transparency. As case law evolves, it contributes to a fairer and more balanced financial system that increasingly prioritizes consumer rights.