Abusive rates: when to review your banking contract

Auto loans, bank credit notes, working capital, overdraft and revolving credit are part of the routine of individuals and companies. What is not always noticed is that these contracts may contain potentially abusive charges and clauses that significantly raise the amount actually paid — and that, in certain situations, may be challenged in court.

What is usually challenged

Brazilian case law, especially from the Superior Court of Justice (STJ), has consolidated parameters for analyzing banking contracts. Among the points most frequently examined are:

• Interest rates well above the market average. The STJ allows review when the contracted rate significantly departs from the average rate calculated by the Central Bank for that type of operation and period.
• Compound interest. Charging "interest on interest" has its own validity requirements.
• Permanence commission combined with other default charges, which case law prohibits.
• Embedded fees and "products" — such as insurance and third-party services — charged without effective agreement.

Reviewing a contract does not mean refusing to pay what is owed; it means paying exactly what is owed, within the law.

The importance of the Central Bank average rate

One of the main criteria is comparing the contracted rate with the Central Bank's historical series. If the agreed interest significantly exceeds the market average for similar operations, there is technical room to discuss abusiveness. This analysis is objective and based on official data.

Total Effective Cost (CET)

Often the advertised interest rate does not reflect the real cost of the operation. The CET gathers interest, fees, taxes and insurance. Discrepancies between the disclosed CET and the charges actually applied are a relevant sign that the contract deserves closer analysis.

When a review is worthwhile

Judicial review is neither automatic nor suitable for every contract. It makes sense when an accounting expert analysis identifies genuinely unlawful charges and quantifies the difference between what was charged and what would be due. The starting point is to gather the contract, statements and the debt evolution report and submit them to technical analysis.