Default and Statutory Interest: How They Are Counted and Adjusted

Paying late does not only mean you still owe the principal. It starts the clock on default interest, and the date that clock starts changes depending on whether the obligation comes from a contract or from a wrongful act. Default interest also runs alongside monetary adjustment without being the same thing.

Default is qualified delay, and it reaches both sides of the obligation

The Brazilian Civil Code defines default by looking at both sides of the legal relationship. Under Article 394, “a debtor who fails to make payment, and a creditor who refuses to accept it, at the time, place and in the manner established by law or by agreement, are considered to be in default.” The wording is deliberately symmetrical: delay is not a flaw found only in those who owe money, but also in those who obstruct receipt of payment.

There is, however, an attribution filter. Article 396 provides that if no act or omission is attributable to the debtor, the debtor is not in default. A person who fails to pay because of circumstances that cannot be blamed on him remains in non-performance in the objective sense, but does not take on the charges that come with culpable delay.

The financial effects of the debtor’s default are set out in Article 395, whose main clause was reworded by Law 14.905/2024. The debtor answers for the losses caused by the default, plus interest, adjustment of monetary values, and attorney’s fees. The sole paragraph gives the creditor a more drastic option: if the performance becomes useless because of the delay, the creditor may reject it and demand damages.

The creditor’s default works in the opposite direction and bears directly on the count. Under Article 400, it relieves a debtor who acted without fraud of responsibility for preserving the thing owed, obliges the creditor to reimburse preservation expenses, and subjects the creditor to receiving it at the valuation most favorable to the debtor. While the creditor refuses proper payment, there is no debtor default to compensate, so the interest clock does not start.

This point tends to be underestimated in judicial collection. A debtor who shows that he offered performance at the right time, in the right place and in the right manner shifts the delay, and the cost that comes with it, onto the creditor. Curing the default, provided for in Article 401 for each of the parties, ends that state of affairs, and its own requirements are separate from the question of the starting date.

It is worth noting that Article 407 dispenses with proof of loss. Even if nothing is alleged on that score, the debtor owes default interest, both on money debts and on performances of another nature whose monetary value has already been fixed by judgment, arbitration or agreement.

Ex re and ex persona default: who has to be notified

This distinction decides both the proof and the date. Article 397, in its main clause, provides that failure to perform a positive and liquid obligation by its due date places the debtor in default by operation of law. This is ex re default, in which the due date itself serves as the demand, with no act required from the creditor.

Three requirements must be met together in this case. The obligation must be positive, meaning an obligation to give or to do rather than to refrain. It must be liquid, with a determined amount or one that can be found by simple calculation. And it must have a due date, a fixed date for performance. If any one of them is missing, the main clause does not apply.

For the remaining scenario, the sole paragraph of Article 397 provides that where there is no due date, default arises through a judicial or extrajudicial demand. This is ex persona default, which depends on a documented initiative by the creditor. A notice sent by registered mail, a demand served through a registry of deeds and documents, or an appropriate court filing can all serve the purpose, as long as receipt can be proved.

The practical consequence is financial. In an obligation with no due date, every week the creditor waits to make the demand is a week of interest he will not collect, because the count does not reach back to a due date that never existed. The same reasoning explains why well-drafted contracts set a fixed date: they convert the situation in the sole paragraph into the one in the main clause.

There is also a third category, which requires neither a due date nor a demand. Article 398 provides that in obligations arising from a wrongful act, the debtor is considered in default from the moment he committed it. Here the default arises with the harmful act itself.

In an obligation with a fixed date, the due date speaks for the creditor; without one, only a formal demand starts the clock.

Correctly classifying the obligation is therefore the first task in any calculation. Before choosing a rate or an index, you need to determine which of the three situations the case falls into, because that is where the date comes from, and everything else accumulates from that date.

The starting date of interest in each type of obligation

Article 405 of the Civil Code states that default interest is counted from the initial service of process. Read in isolation, the provision would suggest that no interest runs before the lawsuit, which would flatly contradict Articles 397 and 398.

The procedural law reconciles the two. Article 240 of the Code of Civil Procedure provides that valid service of process, even when ordered by a court without jurisdiction, places the debtor in default, “subject to the provisions of Articles 397 and 398” of the Civil Code. The caveat is explicit: service of process creates default only when default has not already arisen earlier.

The result is a three-part framework for obligations to pay. When there is a due date, interest runs from the due date. When there is none, it runs from the formal demand. In non-contractual liability, it runs from the event itself, and STJ (Brazil’s Superior Court of Justice) Summary Precedent 54 consolidates this criterion by stating that “default interest runs from the harmful event, in cases of non-contractual liability.”

In this arrangement, service of process works as a residual starting date. It helps the creditor who made no earlier formal demand and has no fixed due date, in which case the service of process becomes the only milestone available in the record.

In practice, this comes down to what you ask for. A complaint seeking payment of a sum should state expressly the starting date it seeks and the basis for it. Otherwise, the judgment may adopt the latest milestone for lack of anything that justifies another. A generic request for statutory interest tends to produce a count that starts at service of process.

The statutory rate in Article 406 and the new calculation method

Article 406 deals with the rate that applies when the parties have agreed on nothing. Its main clause, as reworded by Law 14.905/2024, provides that “when they have not been agreed upon, or when they have been agreed upon without a stipulated rate, or when they arise from a statutory requirement, interest shall be set according to the statutory rate.”

The content of that statutory rate is in § 1, added by the same law. The statutory rate corresponds to the reference rate of the Special Settlement and Custody System, the Selic, less the monetary adjustment index referred to in the sole paragraph of Article 389 of the Code itself. It is therefore not a percentage written into the law, but the result of a subtraction.

Section 2 assigns the operational details to two authorities: the calculation methodology for the statutory rate and the way it is applied are defined by the National Monetary Council and published by the Central Bank of Brazil. Section 3 completes the system with a floor, providing that if the statutory rate comes out negative, it is treated as zero for purposes of calculating interest in the reference period.

Three consequences follow from this design. The rate changes over time, which calls for a spreadsheet by reference period rather than a single percentage applied to the whole interval. The source of the figure is the official publication, never the parties’ estimate. And if there are periods with a negative result, the calculation cannot produce negative interest that reduces the debt.

The new wording took effect sixty days after its official publication, which occurred in July 2024. Calculations, spreadsheets and contract templates built on the earlier criterion need to be revisited before they are reused, and long-running debts may require splitting the period into two segments, each under the rule in force at the time.

None of this displaces the parties’ autonomy. The main clause applies only when interest was not agreed upon or was agreed upon without a stipulated rate, so the contractual rate, within the limits of specific legislation, continues to prevail over the statutory one.

Monetary adjustment is not interest, and combining them has a filter

Confusing the two charges produces inflated calculations and easy challenges. Monetary adjustment merely restores the purchasing power of the amount owed and adds nothing to the creditor’s wealth. Interest compensates for the unavailability of capital during the delay and is an addition to the debt.

The law treats the two items separately. Article 389, as reworded by Law 14.905/2024, provides that if the obligation is not performed, the debtor answers for losses and damages, plus interest, monetary adjustment and attorney’s fees. Article 404 repeats the separation for obligations to pay money, whose losses and damages are paid with monetary adjustment, interest, court costs and attorney’s fees.

The adjustment index is also no longer a gap in the law. Under the sole paragraph of Article 389, if the index was neither agreed upon nor provided for in specific legislation, the change in the Broad National Consumer Price Index (IPCA), calculated and published by the IBGE (Brazilian Institute of Geography and Statistics), applies, or that of whatever index replaces it.

The filter against double counting lies in § 1 of Article 406 itself. Because the statutory rate is already the Selic less the monetary adjustment index, an adjustment applied in parallel does not compensate for the period’s inflation twice. Combining the two items is proper; combining the full Selic with the IPCA over the same interval is not.

The starting dates, on the other hand, may not coincide. For a debt arising from a wrongful act, STJ Summary Precedent 43 provides that monetary adjustment applies from the date of the actual loss, while Summary Precedent 54 places interest at the harmful event. For non-material (moral) damages, Summary Precedent 362 fixes the adjustment from the date the amount was set by the court, even though interest goes back to the act.

That leaves the supplement in the sole paragraph of Article 404. If it is proved that default interest does not cover the loss, and there is no contractual penalty, the judge may grant the creditor supplementary compensation. This safety valve becomes especially important when the statutory rate for the period falls below the loss actually suffered.

Frequently Asked Questions

From when does interest run on a debt with a due date?

From the due date itself. When the obligation is positive, liquid and has a due date, Article 397 of the Civil Code places the debtor in default by operation of law, with no notice required. In this situation, service of process does not serve as the starting date, because Article 240 of the Code of Civil Procedure expressly excepts cases already covered by Articles 397 and 398. Even so, it is wise to ask in the complaint for the count to run from the due date, stating the exact date.

Can a creditor charge statutory interest and monetary adjustment at the same time?

Yes, because the two items serve different functions and appear separately in Articles 389 and 404 of the Civil Code. The care needed is in how they are calculated, since the statutory rate in § 1 of Article 406 is the Selic less the monetary adjustment index and enters the calculation already net. Adding the full Selic to the IPCA over the same period compensates for inflation twice and is likely to be reduced if challenged.

How do you prove default when the contract has no fixed deadline?

Through a judicial or extrajudicial demand, as provided in the sole paragraph of Article 397. What matters is proof of receipt, not the means chosen, so a registered notice, a demand served through a registry of deeds and documents, or an equivalent court filing all meet the requirement. Without that document, the starting date tends to move back to service of process, and the interest for the earlier period is lost.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.