Default Interest under the Brazilian Civil Code: STJ Consolidates Understanding on the Application of the SELIC Rate

Recently, the Superior Court of Justice (“STJ”), under the repetitive appeals procedure, ruled on Special Appeal No. 2,199,164 – PR, addressing whether, prior to the entry into force of Law No. 14,905/2024, the default interest provided for in Article 406 of the Civil Code should be calculated based on (i) the Special System for Settlement and Custody (“SELIC”) rate, or (ii) the 1% per month interest rate established under the Usury Law, with monetary adjustment applied separately.

In July 2024, Law No. 14,905/2024 was enacted, adding Paragraph 1 to Article 406 of the Civil Code. The provision establishes that, in the absence of an agreement governing interest, the SELIC rate applies, less the monetary adjustment index provided for in Article 389 of the same statute (IPCA).

In general terms, the rule established is that, where the parties have not agreed on a different mechanism, the SELIC rate will be applied as a single benchmark, encompassing both default interest and monetary adjustment.

The legislative amendment confirmed the understanding that the STJ had already been adopting in cases involving the enforcement of judgments concerning civil debts without a contractual clause establishing an interest rate, recognizing the SELIC rate as the appropriate benchmark for purposes of Article 406 of the 2002 Civil Code.

The discussion regarding the rate applicable to the default interest provided for in Article 406 dates back to the enactment of the Civil Code in 2002, when there were disagreements over whether the SELIC rate or the 1% per month interest rate should apply, pursuant to Article 161, Paragraph 1, of the National Tax Code.¹

The issue only began to be settled in the STJ’s case law following the judgment of the motion for divergence in Special Appeal No. 727,842 – SP, under the reporting of Justice Teori Zavascki, when the Court held that the SELIC rate was the applicable rate, as established by Article 406, main provision, of the Civil Code.

Along these lines, the STJ’s recent decision resulted in Theme 1,368, establishing the understanding that, even before Law No. 14,905/2024 entered into force, Article 406 of the Civil Code “must be interpreted to mean that the SELIC rate is the default interest rate applicable to civil debts, as it is the rate in force for monetary adjustment and default in the payment of taxes owed to the Federal Treasury.”

As grounds for the legal proposition established, the Court emphasized that default interest is compensatory rather than punitive in nature. Therefore, adopting an index higher than the SELIC rate — such as the 1% monthly interest rate plus monetary adjustment — would result in excessive compensation to the creditor, potentially exceeding any financial investment available in the market and creating room for unjust enrichment, particularly because the financial system itself operates under the SELIC rate.

In addition, the Court highlighted the constitutional status of the SELIC rate following its inclusion in the Constitution through Constitutional Amendment No. 113/2021, reinforcing its legitimacy as a benchmark for legal relationships, both public and private.

Another point emphasized was that, even before Paragraph 1 was added to Article 406 of the Civil Code by Law No. 14,905/2024, there was already systemic consistency in using the SELIC rate, both because several tax laws use it as a benchmark for calculating default interest and monetary adjustment and because the former Article 406 of the Civil Code never referred to Article 161, Paragraph 1, of the National Tax Code.

This is therefore not a legislative innovation, but rather the consolidation of a judicial debate that began with the enactment of the Civil Code and that had already been examined and confirmed by the STJ on at least three separate occasions (Themes 99, 112, and 1,368).

The establishment of Theme 1,368 puts an end to the interpretative discretion previously available to State Courts and lower courts, providing greater legal certainty for private transactions and bringing a decades-long debate to a close.

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