Brazil approves changes on credit scoring system

April 9, 2019

Brazil approves changes on credit scoring system

On April 8, Brazilian President Jair Bolsonaro sanctioned Law 166/2019, which modifies the country’s credit scoring system. The alteration marks a major change on the way credit scoring works in Brazil, passing from an opt-in model to an opt-out format. The new rules will come into force on July 9.

The credit scoring system is a public policy designed to create a credit history based on databases containing individuals’ and legal entities’ credit-related information received from lenders and companies they do business with. The credit history originated from this information is then used to support loans and other business decisions, so that companies can be previously aware of the risks involved in the operation.

Brazilian current credit scoring system works under the opt-in model, which means that consumers must provide informed consent so that their personal information be included on credit bureaus’ databases. The new law changes this to the opt-out model by establishing that personal data will be automatically included on the system’s databases unless the consumers exercise their opposition right.

Although the new rule waives consent, the creation of a credit history must be previously and clearly informed to the consumer in a 30-day period. The credit bureaus must also make available, when requested, a text summarizing the consumer’s rights, such as the right of access, the right of data rectification, cancellation or exclusion, the right to object the processing, the right of information and explanation regarding the use of data and the right to review automated decisions.

The use of sensitive information – those related to racial or ethnic origin, religious belief, political opinions, health or sexual orientation, genetic or biometric data – and excessive information – those that are nor related to the consumer’s credit risk – is still forbidden.

With the change from the opt-in to the opt-out model, the government seeks to boost the adherence to the credit scoring system, which currently contains 11 million users. The expectation is that this number mount up to 120 million. The government and the market expect that the new policy might foster the economy and provide the following effects:

• Interest rates might represent better the risks involved in credit operations; • The reduction of interest rates for good payers; • The reduction of the net interest spread; • The increase of financial inclusion; and • The reduction of transaction costs. The following months may host several debates regarding the alteration on the credit scoring regime. From now on, the credit bureaus must adequate to the new rules to fulfill the duty to inform the consumers and to comply with the principles inherent to the use of personal data. The consumers, on the other hand, must remain vigilant to the new rules in order to guarantee the righteous use of their information.

In the past few years, our team has worked on some of the leading cases regarding data privacy in Brazil, with successful results. For more information regarding this issue or to receive an English version of the Law, please e-mail us at