We can define the consorcio as a purchase system used to acquire goods and interests. The major characteristics of a consorcio and the most recent changes occurred in Brazil with the introduction of the “New Law of the Consorcios” (Law 11795/2008), which has been effective since February 6, 2010, are shown below. Among the ones that stand out are the possibility of getting a consorcio to acquire services (a trip, for example) and of using the acquired quota to pay off a loan.
Are there new modes of consorcios?
One of the major changes brought about by the new Law is the consorcio market for the service segment.
Before that, only goods and real property could be acquired through consorcios, such as vehicles, equipment and real property. Now, administrators of collective financing plans (consórcios) can create, for instance, plans for those who want to have a plastic surgery, dental prostheses, trips, MBA courses, among others.
In case a client waives, when will he get his money back?
Those who waive can continue participating in the drawings, just as the other members of the group. The client will get the value paid as soon as he gets drawn.
Are these changes good for new groups as well as groups in progress?
No. The changes set by the New Consorcio Law are good only for new groups. For groups in progress to adopt the new rules it is necessary that their members hold an Extraordinary General Meeting and decide whether they want the changes or not.
Can the consorcio be used to pay off loans?
Yes, the new groups will be able to do that.
But to do that, the financed goods must be the same as the consorcio and also has to be in the name of the same buyer.
The value can only be used if it is enough to pay off the loan.
Can consorcio members use the FGTS (severance pay indemnity fund) to pay for the installments?
In this case, the present rule, which proposes the use of FGTS to make a bid and to add to the letter of credit, still stands.
1.What is a consorcio?
Group of natural people or legal entities that pool together to purchase a certain item through monthly installments within a predetermined period of time. Every month the group buys an item which is then awarded by draw to one of the group members.
2. Who regulates and controls the system?
The consorcio system is regulated and controlled by the Central Bank of Brazil.
3. Can I get more than one letter of credit?
Yes, the consorcio makes it possible for you to get more than one letter of credit by means of previous analysis. However, it is to acquire only one item, the quotas must be from the same group.
4.How do I get information about my consorcio plan?
The consorcio member gets a password to access information on the Internet, monthly statements, electronic service and service center, by phone.
5.Is is possible to acquire life insurance for the consorcio members? What are the coverages?
Yes, coverage for natural or accidental death and permanent and total disability by accident.
Because it is a loan protection insurance, should an accident happen the debit balance will be paid off according to the percentage of participation of the quota.
The insurance is only for natural person by means of previous analysis by the administration office.
6. What is the adjustment index on installments? And how often do price readjustments occur?
Real estate is readjusted by the INCC (National Index of Construction Costs) every 12 months, as from the date on which the group was put together.
Cars are readjusted according to the manufacture’s price list or FIPE price list.
7.Can I make advanced payments?
Yes, the consorcio member can make advanced payments on the debit balance in reverse order from the last one.
8.Where will the meetings be held?
The meetings will be held in predetermined places according to the annual calendar of the insurance company.
9.How can I get the results of the meetings?
The results can be gotten from attending the meetings, through the insurance company site, monthly balances, electronic service and service center.
10. How can I use my letter of credit?
Car Consorcio – new or used (up to 3 years old from date of manufacture) cars, utility vehicles, trucks and other motor vehicles can be acquired.
Real Estate Consorcio – new or used or even for building or renovation residential, business or vacation property, piece of land can be acquired.
The property can be acquired all over the National Territory.
12.Is the property appraised?
Yes, in case of real estate, it will be appraised by a certified engineer from the insurance company and in case of used vehicles the consorcio member will have to turn in an appraisal by a certified car dealer.
13.Is the property used as guarantee?
Yes, the real estate will be mortgaged or alienated and the vehicle will be alienated until the debit balance has been paid off.
14.What is a letter of credit?
A letter of credit is a document representing the available value to acquire the property.
15.When is the letter of credit made available?
The letter of credit is made available to purchase the property after the guarantee and the documentation existing in the rules are presented.
16.Can I acquire a property that is worth less than my letter of credit?
Yes, the consorcio member that has been drawn will allot the credit difference to pay overdue installments, in reverse order from the last one, or he has paid off his debit balance, he will get the difference back.
17. Can I use the FGTS (severance pay indemnity fund) on my real estate consorcio plan?
Yes, the FGTS can be used as credit complement and payment of bid as long as the rules set by the Curators of Caixa Economica Federal (a Brazilian government-owned financial institution) are met.
18.How is the drawing made?
The first drawing is made at the 1st meeting to set up the group.
From the 2nd meeting on the drawing takes place every month through the National Lottery.
19.How do we bid?
You can bid:
- In person at the meeting
- Via Internet
-Via electronic service
- Up to 12 hours before the meeting (using your password)
20.What are the criteria to determine the winning bid?
The bids must be put forward in percentage over the credit value plus taxes.
The winning bid is the one which represents the highest percentage of amortization.
21.How will my bid be accounted for in the consorcio plan?
The resources from the winning bid will be considered as advance payment of installment in reverse order starting from the last one and reducing the time limit for payment.
-The dilution will be proportional on the outstanding installments, reducing their values.
- Valid condition for some groups, according to respective contract.
22.What is a diluted bid?
It is value reduction of the installment without entailing reduction of time limit for payment. Valid condition for some groups of real estate and cars, according to respective contract.
23.How can I use part of the credit as a bid?
The consorcio member can use up to 30% of his credit to pay his bid (except for Rent Plan and Car Consorcio groups)
24. How will the award happen?
The award will happen monthly by means of drawing and bidding according to available funding of the group.
25. What are the procedures after the award has taken place?
After being awarded, the consorcio member will be given a guiding manual with explanations and necessary forms in order to acquire his property.
26. Is there a time limit to acquire the property after the award?
No, the consorcio member can acquire his property up until the group is closed.
27. Will the credit value be corrected after the award has happened?
Yes, the awarded credit will be updated through earnings of financial investments.