By Maria Eduarda X. Soares and Heloísa Nogueira
In recent months, the legal and business sectors have been impacted by a decision promising to reshape how credit, risk, and collateral are viewed in Brazil. In its ruling on Direct Action of Unconstitutionality No. 7600, the Supreme Federal Court upheld the constitutionality of the Legal Framework for Collateral (Law 14.711/2023)—a regulation with very concrete implications for banks, companies, and investors.
However, before discussing case law, it is essential to understand the backdrop. Historically, Brazil has been a country where credit is expensive. This stems not only from classic economic factors—such as inflation or the Selic rate—but also from legal uncertainty. For every loan granted, there is always a question as to whether, in the event of default, the creditor will actually be able to recover the lent funds. Judicial enforcement is slow and often ineffective; the sluggishness of the judiciary ends up being priced into the interest rates we all pay.
It is against this backdrop that the Legal Framework for Collateral emerges.
The law updates traditional legal concepts, such as mortgages and fiduciary alienation, and introduces more agile mechanisms, particularly regarding extrajudicial enforcement. The legislation’s great promise is simple: to enable faster and more predictable credit recovery without relying entirely on judicial oversight, provided that constitutional limits are observed.
The controversial point, naturally, lay right there. Would it be legitimate to remove such a sensitive aspect as the enforcement of collateral from the Judiciary, thereby granting the creditor—usually a financial institution—the power to carry out the expropriation of assets more directly? For many critics, this violated the clause guaranteeing access to the courts—a principle enshrined in Article 5, item XXXV, of the Constitution.
The Supreme Court (STF), however, stood firm. Beyond being more compatible with the Constitution, the model addresses a concrete need to modernize the credit market. The Court acknowledged that the law guarantees the debtor's right to turn to the judiciary in cases of abuse or illegality, but noted that this does not preclude the existence of extrajudicial avenues as the standard procedure. Seeking a private solution ceases to be the exception and becomes the norm, while judicial intervention becomes the exception. In essence, it is a reversal of the prevailing logic.
By providing creditors with greater assurance that collateral can be efficiently enforced, the cost of risk tends to decrease. And as the cost of risk falls, the natural result is cheaper credit for companies and consumers. In other words, a shift stemming from sophisticated constitutional debates at the Supreme Court has the potential to directly impact the cost of car financing, small business loans, or rural credit lines.
It heralds a cultural shift in the credit market. The Legal Framework corrects historical distortions, such as the practice of so-called "super-collateral"—where a relatively small loan was backed by assets of far greater value. There is now room for more rational and efficient asset management, which can expand access to credit and reduce systemic costs.
At the same time, debtors must be aware that the rules of the game have changed. Outcomes that previously took years to materialize—such as the loss of a property or vehicle pledged as collateral—can now occur within much shorter timeframes. This new landscape tends to shape borrower behavior; borrowers will need to assess risks more cautiously, negotiate on more balanced terms, and, above all, understand that default will lead to much swifter and more predictable consequences.
The Supreme Federal Court (STF) decision signaled a new phase in credit relations in Brazil. For creditors, it represents an opportunity to maximize the effectiveness of guarantees. For debtors, it necessitates a rethinking of their conduct in a scenario where the duration of legal proceedings will no longer be an ally. From now on, the Brazilian credit market will operate under this new logic, and the legal profession will play an essential role in guiding companies and individuals through this transition.
FRAMEWORK. Legal framework for guarantees: Modernization of access to credit – Migalhas. Available at: <https://www.migalhas.com.br/depeso/406816/marco-legal-das-garantias-modernizacao-do-acesso-ao-credito>. Accessed on: Oct. 6, 2025.
BRAZIL. Supreme Federal Court. Direct Action of Unconstitutionality (ADI) No. 7600. Rapporteur: Justice Dias Toffoli. Judgment: June 2025. Available at: https://portal.stf.jus.br/processos/detalhe.asp?incidente=6845229. Accessed on: Oct. 6, 2025.
BORIN, D. Consultor Jurídico. Available at: <https://www.conjur.com.br/2025-ago-06/marco-legal-das-garantias-menos-processos-judiciais-mais-eficiencia/>. Accessed on: Oct. 6. 2025.
