During the election period, the Government of then President Jair Bolsonaro (PL) created the Auxílio Brasil payroll loan and released loan amounts to beneficiaries of the income transfer program. As a result, one in every six families that receive monthly government payments made the payment, totaling R$ 9.5 billion in disbursements until November 1st.

The Ministry of Finance collected the data that was included in the final report of the Social Development technical group in the transition team. According to the president's team, Luiz Inácio Lula da Silva (PT), the measure must be suspended, as well as the change in the legal framework, to avoid the over-indebtedness of families in situations of social vulnerability in Brazil.

Families benefiting from Auxílio Brasil live in poverty (up to R$ 210 per person) or extreme poverty (up to R$ 105 per person). Beneficiaries of the BPC (Continuous Payment Benefit) are elderly people over 65 years of age or people with low income and disabilities.

In most cases, beneficiaries who used payroll loans used the resources to purchase food, pay bills and even for the end of year parties.

“These people will have up to 40% of the committed benefit […]. The measure, clearly for electoral purposes, goes against social protection policies and compromises future benefits”, says the document. In cases where the family is suspended or excluded from the program, the amount of 40% referring to the R$ 400 previously paid by Auxílio Brasil will continue to have an impact on any other possible income they have.

The Auxílio Brasil consigned credit was established in March 2022 by the government of Jair Bolsonaro, through an MP converted into law in August.

According to Ministry of Citizenship regulations, the interest ceiling is 3.5% am (equivalent to 51.1% per year), and the maximum number is 24 installments for payment.

However, most banks and financial institutions chose not to offer the loan due to the high risk of default and possible damage to their image, as in practice it encourages the indebtedness of a vulnerable population.

The transition team is concerned about families in the program who have already taken out the Auxílio Brasil payroll loan, as they may lose the benefit because they do not comply with the payment rules, or because of the changes that must take place in Bolsa Família.

According to Lula's team, it is necessary to discuss and reformulate a new benefit for Bolsa Família, prioritizing payment per person. Today, the minimum benefit payment is R$ 600, and the Bolsonaro government has accelerated the registration of 3.7 million single-person families.

With the changes, it is likely that the benefit of some families will be reduced, blocked or even suspended. “People who take out payroll loans will have their family income at risk, whether or not they remain in the income transfer program, even if they leave the program due to reformulation, investigation or impossibility of updating information. This is a lack of future social protection, with the transfer of substantial amounts of these families’ income to the financial system”, reports the document.

The transition recommendation is “suspend the payroll loan until the STF decision” and do the “damage assessment“. There may also be a reduction in interest rates and the creation of an information panel on payroll loans.

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