Brazilian President Jair Bolsonaro has approved Law 166/2019, the so-called compliant debtors law, modifying the country’s credit scoring system. The new rules will come into force on July 9, 2019.

The credit scoring system has been in place since 2011, but until now consumer adherence was voluntary. According to the new law, approved on April 8, the Brazilian credit scoring system will change from an opt-in to an opt-out format. Therefore, the inclusion of consumers on the credit scoring list, which used to be made upon their request, will now happen automatically, and consumers will have to request exclusion from the list if they do not want to appear on it.

According to the new rules, each Brazilian citizen will have a credit note (score), which will take into account the payment of their bills, such as bank loans, credit cards and bills for public services such as water, electricity, telephone and gas. However, information such as bank balances and bank statement details, as well as details of credit card bills, will remain confidential and will not appear in the credit scoring system.

With the new law, the expectation is that the database, which currently contains data for approximately 6 million customers, will receive information from more than 110 million people.

One expected outcome of the new law will be increased competition in the supply of credit. Currently, many institutions do not offer credit at competitive costs because they do not have access to customers’ scores. However, with the new Brazilian credit scoring system, this scenario will change.

It is important to point out that, although the new rule waives the need for the consumer to provide express 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, upon request, a summary of consumer rights, such as the rights of access; data rectification; cancellation or exclusion; the right to object to the processing of information; the right to an explanation regarding the use of data; and the right to review automated decisions.

Moreover, it is still forbidden to use sensitive data (such as data revealing racial or ethnic origin, religious belief, political opinions, health or sexual orientation, genetic or biometric data) as well as information that is not related to the consumer’s credit risk.