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Interest rate limits: the Usury Law and the legal rate

Last verified: 2026-10-27 · Status: Changing

Abroad, commercial parties usually agree any interest rate; in Brazil the 1933 Usury Law still caps interest and bans compounding more often than yearly, but since August 2024 it no longer applies to contracts between companies, credit instruments, securities or loans from banks and funds. When no rate is agreed, late interest runs at the legal rate: the Selic rate minus inflation (IPCA), set monthly by the Banco Central; for October 2026 it is 0.379020 percent a month. IPCA monetary correction applies on top unless another index was agreed or set by law.

USD figures use the Banco Central do Brasil PTAX selling rate of R$5.3346 per US dollar for 27 October 2026. Conversions are for orientation only.

Key facts

Legal interest rate (Civil Code art. 406), October 2026	0.379020 % per monthComunicado BCB nº 46.052; Res. CMN 5.171, as of 2026-10-01 · in force
Legal interest rate method	Selic minus IPCA (floor zero) Código Civil art. 406 § 1, as of 2026-10-27 · in force
Usury Law applies to contracts between companies	No Lei nº 14.905 art. 3 item I, as of 2026-10-27 · in force
Compounding of interest under the Usury Law	Prohibited except annual capitalization of overdue interest in current accounts Decreto nº 22.626 art. 4, as of 2026-10-27 · in force
Default monetary correction index	IPCA Código Civil art. 389 sole paragraph, as of 2026-10-27 · in force

The rule

1. The Usury Law prohibits agreeing interest above double the legal rate (it refers to the legal rate of the 1916 Civil Code), with lower caps for loans secured on urban mortgages (10 percent a year), rural mortgages or agricultural pledges (8 percent) and secured farm financing (6 percent). If the rate is not stipulated in a public deed or private writing, interest is 6 percent a year from the filing of suit or the protest. Interest on interest is prohibited, except annual capitalization of overdue interest in current account balances. Disguising the true rate is the crime of usury.
Cost to do it: No fee; agreed interest above the cap or improper compounding is unenforceable for the excess and can be a crime.
Example: A loan between two individuals with monthly compounding falls under art. 4. / No statutory US dollar amount.Decreto nº 22.626 of 7 April 1933 (Usury Law), Arts. 1 caput and §§ 1 to 3, 4 and 13, 1933-04-07 official text · verified 2026-10-27

2. The Usury Law does not apply to obligations between legal entities; obligations represented by credit instruments or securities; obligations with financial institutions and other institutions authorized by the Banco Central, investment funds or clubs, leasing companies and simple credit companies (ESC), or credit focused civil society organizations (OSCIP); and transactions in the financial, capital or securities markets.
Cost to do it: No cap on rates agreed between companies, so intercompany and supplier credit is priced freely.
Example: A Brazilian subsidiary may agree a 2 percent a month late payment rate with a corporate customer. / No statutory US dollar amount.Lei nº 14.905 of 28 June 2024 (published 1 July 2024), Art. 3 items I to IV; art. 5, 2024-06-28 official text · verified 2026-10-27 · changed: Lei nº 14.905 of 28 June 2024 removed contracts between legal entities, credit instruments, securities and loans from authorized institutions and funds from the Usury Law.

3. When interest is not agreed, is agreed without a rate, or arises from law, it runs at the legal rate, which is the Selic reference rate minus the IPCA index of art. 389; a negative result counts as zero. When no correction index is agreed or set by law, debts are corrected by the IPCA. In a loan for economic purposes interest is presumed and, if not agreed, the legal rate applies.
Cost to do it: The legal rate plus IPCA correction on late amounts with no agreed terms.
Example: Unpaid R$100,000 with no agreed rate: one month at the October 2026 rate is R$379.02 of interest, plus IPCA correction. / About US$18,746 of debt and US$71.05 of interest a month.Código Civil, Lei nº 10.406 of 10 January 2002, arts. 389, 406 and 591 as worded by Lei nº 14.905 of 28 June 2024, Art. 389 sole paragraph; art. 406 §§ 1 to 3; art. 591, 2024-06-28 official text · verified 2026-10-27 · changed: Lei nº 14.905 replaced the old legal rate with Selic minus IPCA, in force 60 days after publication on 1 July 2024.

4. The National Monetary Council (CMN) set the method: the legal rate (TL) is calculated each month from the Selic factor of the previous month and the IPCA 15 variation of the previous month, expressed with six decimals, on a simple interest basis, and the Banco Central publishes it monthly. For October 2026 the Banco Central published a legal rate of 0.379020 percent a month (Selic factor 1.01081673; IPCA factor 1.0070).
Cost to do it: No fee; the monthly rate changes with Selic and inflation.
Example: October 2026: R$379.02 of interest on R$100,000 for the month. / About US$71.05 on about US$18,746.Resolução CMN nº 5.171 of 29 August 2024; Banco Central do Brasil Comunicado nº 46.052 of 1 October 2026, Res. CMN 5.171 arts. 2 to 6 and 8; Comunicado 46.052 items a to c, 2026-10-01 official text · verified 2026-10-27

Transaction	Usury Law cap	Default rate if none agreed
Company to company credit or late payment	Does not apply	Legal rate (Selic minus IPCA) plus IPCA
Bank, fund, leasing or ESC loan	Does not apply	Legal rate
Credit instrument or security	Does not apply	Legal rate
Individual to individual, or individual and company outside the exemptions	Applies	Legal rate

Which interest rules apply (Decreto nº 22.626; Lei nº 14.905 art. 3; Código Civil art. 406).

Worked example

A Brazilian distributor owes its supplier R$100,000 (about US$18,746) and the contract sets no late interest. For October 2026 the supplier can claim the legal rate of 0.379020 percent for the month, R$379.02 (about US$71.05), plus IPCA correction (Código Civil arts. 389 and 406). Had the two companies agreed a 2 percent monthly rate, R$2,000 (about US$375) for the month, the Usury Law cap would not apply because both are legal entities (Lei nº 14.905 art. 3 item I).

Step by step

1. State the interest rate and correction index in writing in every credit or supply contract.
2. Check whether the deal falls in a Lei nº 14.905 art. 3 exemption; if not, keep within the Usury Law and avoid compounding more often than yearly.
3. Where no rate is agreed, compute late interest with the monthly legal rate published by the Banco Central, plus IPCA.
4. Keep the Banco Central communiqués for each month claimed.

Common traps

The Usury Law still applies to loans from or to individuals outside the exemptions, including a founder lending to a third party.
The legal rate is published monthly and changes with Selic and inflation; it is zero for a month when inflation exceeds Selic (Código Civil art. 406 § 3).
A rate not agreed in writing under the Usury Law defaults to 6 percent a year from suit or protest (Decreto nº 22.626 art. 1 § 3).
Hiding the true rate through fees or simulation is the crime of usury (art. 13).

Sources

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