(Bloomberg) -- Brazil’s Senate approved legislation to limit the growth of credit card debt to 100% of its original amount, an attempt to cap interest rates that currently average nearly 450%.
Lawmakers passed the bill by acclamation Monday, a day before the expiration of a provisional measure that included the cap. The lower house of congress approved the bill in September, meaning it is now on track to become law.
Once it is enacted, credit card issuers will have 90 days to submit their own regulatory proposal that will need authorization from Brazil’s national monetary council. The cap will take effect only if the companies fail to win approval for their regulation.
Brazil’s interest rates on revolving credit have skyrocketed to an average of almost 446%, their highest level since 2017, according to data compiled by the central bank. Household debt remains near record highs, with outstanding loans representing almost half of disposable income. About 28% of monthly wages is used to repay some sort of debt, from credit cards to mortgages.
Read More: Brazil’s Credit Card Rates Climb to 450%, a Six-Year High
After the proposed cap passed the lower house, Brazil’s banking lobby Febraban said that it could reduce the amount of credit available by rendering a large portion of currently-issued cards economically unviable.
The legislation also sets rules for a consumer debt renegotiation program known as Desenrola.
--With assistance from Maria Eloisa Capurro.
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