Brazil Central Bank Flags Credit Card Debt Burden Among Low-Income Borrowers

Brazil's central bank said lower-income borrowers are spending a growing share of earnings on high-cost consumer credit, prompting policymakers to weigh macroprudential measures targeting riskier lending segments. Borrowers earning up to twice the minimum wage — 3,242 reais ($604) total — devoted 15% of income to credit card debt in June, near record highs and four times the 3.75% among those earning more than 10 times the minimum wage. For unsecured consumer loans, the share was 9.6% versus 3.1% for top earners. The central bank attributed growing reliance on expensive credit since late 2023 partly to rapid digitalization widening credit access. Household debt burdens have reached a 21-year high, with troubled assets in household lending at their highest levels since 2012, driven mainly by delinquency. The bank said credit risk has risen and is likely to remain elevated, with default indicators pointing to continued pressure through the second half of the year.