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Brazil central bank eyes changes in overdraft pricing

Brazil's central bank plans to change banks' ability to charge overdraft fees in an effort to better protect lower-income customers, Valor Econômico reported, citing central bank President Roberto Campos Neto.

Banco Central do Brasil is pursuing further studies on the matter, pointing to a report showing that a majority of overdraft users are low-income clients and that local banks profit on these operations more than their counterparts abroad, Campos Neto said in an interview with the newspaper.

"A large part of overdraft users earns less than two times the minimum wage and, for them, represents a great income commitment by paying 310% interest," Campos Neto said. Meanwhile, overdrafts are part of a portfolio responsible for 10% of Brazilian banks' results, higher than the 2.5% share of overdrafts in banking profits for other countries, the official added.

The central bank aims to make the tariff structure for overdrafts "progressive" by having lower-income people pay less and ensuring that the new rate on top of the overdraft will result in a lower cost, Campos Neto said. "It needs some sort of regulation that makes it clear to everyone that this new structure is to correct a deficiency and that, on average, the cost to people will fall," he noted.