Abusive bank fees and overpricing of the Total Effective Cost (CET)

The increasing complexity of banking services requires consumers to be increasingly attentive to the conditions and costs involved in loans and financing. Within this dynamic, the Total Effective Cost (CET) stands out as one of the most important indicators, as it reflects the real cost of a financial transaction, encompassing interest, fees and other expenses. Unfortunately, the inclusion of abusive fees in bank contracts is a common practice, generating additional and undue costs for the customer.

In this article, we explore how to identify and combat these practices, presenting the fundamental role of banking lawyer or financial lawyer in protecting consumer rights.

1. What is Total Effective Cost (CET) and its importance?

The CET is the sum of all costs involved in a credit agreement. It includes interest, taxes, insurance and other fees. This indicator was created with the aim of allowing consumers to have clarity about the real value of a loan or financing. Thus, CET allows different offers to be compared in a fair and transparent way

However, many financial institutions take advantage of the complexity of contracts and consumers' lack of familiarity to insert fees that increase the effective cost of the transaction. The presence of a banking lawyer can be crucial to review contracts and identify illegal or abusive fees, ensuring that the consumer does not pay more than they should

2. Identifying abusive fees in bank contracts

It is essential that consumers and companies know how to recognize undue tariffs in their contracts. Below, we highlight some of the most common abusive fees:

2.1. Credit Opening Rate (TAC)

Prohibited since 2008, the TAC is still charged covertly by some banks. This fee, previously justified as compensation for the administrative cost of credit analysis, is now illegal and can be challenged in court

2.2. Bill Issuance Fee

This fee is considered abusive, as issuing bank slips is an essential part of the service provided by the bank. According to CMN Resolution No. 3,693/2009, issuance costs should not be passed on to the consumer

2.3. Daily Interest Capitalization

The daily capitalization of interest can be considered abusive and prohibited by Brazilian legislation, as it violates the principles of balance and transparency provided for in the Consumer Protection Code (CDC). The practice of compound interest applied daily exponentially increases the value of the debt in the short term, harming the consumer. According to consolidated jurisprudence, capitalized interest is only permitted for a minimum period of one month, as established in regulated financing, such as real estate or rural credit, through an express and clear clause in the contract. Daily capitalization is, therefore, illegal and subject to legal challenge, especially in cases where there was no clear and informed consent from the client, constituting a violation of the duty of transparency on the part of the financial institution

2.4. Interest rates above the market average

Charging interest above the market average, according to the rates regularly published by the Central Bank of Brazil (BACEN), is a practice that can be considered abusive and subject to judicial review. BACEN periodically publishes the average interest charged on various types of credit, such as overdrafts, personal loans and financing, precisely to ensure that financial institutions act within reasonable and competitive limits. When an institution charges interest significantly above this average without plausible justification, it constitutes an abusive practice, as it imposes a manifestly excessive advantage on the consumer, contrary to art. 39, V, of the Consumer Protection Code (CDC).

2.5. Mandatory Credit Life Insurance

The practice of making the granting of credit conditional on taking out insurance, known as “bundling”, is prohibited by the Consumer Protection Code (CDC). The customer has the right to refuse insurance and request a refund of amounts unduly paid

3. Consequences of abusive fees for the consumer

The inclusion of abusive fees has a direct impact on the consumer's financial health. Consequences include:

● Increase in monthly installments: Undue fees increase the value of installments, making payment difficult and increasing the chance of default.

● Larger long-term debts: With interest on artificially high amounts, the customer can get into even more debt.

● Compromise of the family budget: Low-income consumers are especially affected as they cannot afford unexpected costs

4. Consumer rights and complaints procedures

The consumer has the right to transparency and clarity in information about any tariff applied. In case of irregularities, the recommended steps are:

1. Review the contract: Identify whether the fees charged are clearly foreseen and comply with regulations.

2. Request clarification from the bank: If any suspicious fees are identified, the customer can request a review and refund of undue amounts.

3. Register a complaint with Procon or Banco Central: These bodies are responsible for mediating conflicts and ensuring that consumer rights are respected

4. Take legal action: If necessary, a financial lawyer can help formalize a lawsuit to recover amounts unduly paid and obtain compensation for damages

5. Financial education and abuse prevention

Financial education is a powerful tool to prevent banking abuse. Well-informed consumers are able to identify abusive practices and avoid financial traps. Furthermore, comparing offers from different financial institutions is essential to obtain the best credit conditions.

6. Conclusion: the importance of a banking and financial lawyer

The Brazilian financial system is full of complexities and traps that can harm consumers and companies. The inclusion of abusive rates in the CET is one of these practices that, although illegal, is still common. Banking lawyers and financial lawyers are essential allies in defending consumer rights, working in prevention, negotiation and, when necessary, in the judicial sphere.

By relying on the advice of specialized professionals, consumers are better prepared to deal with the pitfalls of banking contracts and ensure that their rights are respected. Furthermore, financial awareness and education are fundamental steps to prevent new abuses and strengthen the relationship between banks and consumers.

In short, the presence of a banking lawyer and financial lawyer can make all the difference, ensuring that contracts are fair and transparent, and that consumers have access to credit without being penalized by undue fees.

About the Author: Otavio Andere Neto is a lawyer with over 20 years of experience.

Featured photo: Abusive bank fees (reproduction/disclosure)