There's a silent assumption behind almost every business credit application: that the CET (Custo Efetivo Total, Brazil's Total Effective Cost) number printed on the contract or shown on the app screen is an unquestionable mathematical truth, calculated and checked by a bank that presumably understands financial math better than anyone. In a meaningful fraction of the operations reviewed in this series, that assumption turned out to be false.
In at least five of the twenty cases analyzed, the CET stated in the contract was inconsistent with the contract's own nominal interest rate stated in the same document — in some cases, the CET appeared numerically equal to or even lower than the nominal rate, something mathematically impossible whenever fees, the IOF tax, insurance, or other charges are financed within the operation, since the CET is, by definition, always equal to or greater than the nominal rate when additional costs exist.
In this analysis
What the CET is, in simple terms
The CET is the rate that summarizes, in a single number, the total cost of a credit operation — not just interest, but also fees, taxes (like the IOF), and any bundled insurance, expressed as an equivalent effective annual or monthly rate. It exists precisely to allow standardized comparison between different credit proposals, and its disclosure is mandatory under Brazilian Central Bank regulation (CMN Resolution 3.517/2007 and related rules).
Mathematically, the CET can never be lower than the operation's nominal interest rate, for the simple reason that it incorporates the nominal rate plus every other cost. If the contract shows both numbers and the CET is equal to or lower than the nominal rate, there's an error — in calculation, data entry, or methodology — that needs to be clarified before signing.
The consistency test any layperson can run
You don't need to be a financial expert to run a basic plausibility check. Three simple questions already reveal most of the problems found in forensic reviews:
Is the CET higher than the nominal rate? Compare the two numbers, both on the same basis (monthly with monthly, annual with annual). If the CET is equal to or lower than the nominal rate, and any fee, IOF or insurance is embedded in the operation, there's an inconsistency that deserves a written explanation from the bank.
Does the CET account for the grace period? If the contract includes a grace period with interest capitalization before the first installment, ask the bank explicitly whether the stated CET already reflects that effect, or whether it was calculated only over the amortization period. A "clean" CET that ignores the grace period understates the operation's real cost.
Does the CET account for bundled products (insurance, savings bonds)? In more than one case reviewed, the stated CET was numerically identical to the nominal rate, completely ignoring the cost of a business life insurance policy or a savings-bond product sold alongside the credit — often representing more than 10% of the operation's total value. If there's a bundled product, it must be included in the CET; if it isn't, the number is incomplete.
Does your contract's CET pass this test?
Request a preliminary technical screening — we compare the stated CET against the actual payment flow in your contract.
A simplified numeric example
Suppose a R$300,000 operation, with a 1.75% monthly nominal rate, a 2% origination fee charged at disbursement, and roughly 1% IOF financed within the principal. A CET that correctly reflects these costs necessarily has to be higher than 1.75% per month — the exact difference depends on the term and amortization method, but the direction is always the same: up, never down or equal.
If the contract shows, for that same operation, a CET of "1.75% monthly" or "1.70% monthly" — identical to or lower than the nominal rate — that isn't good news that "there are no additional costs": it's a technical signal of a calculation error or an omission of components of the total cost, and it should be formally questioned before signing.
What to do when you find an inconsistency
Finding an inconsistency doesn't automatically mean bad faith — it could be a system error, an outdated contract template, or human error in composing the document. But the borrower has both the right and the practical interest to:
- Request the CET calculation memo in writing, broken down by component (interest, fees, IOF, insurance).
- Refuse to sign until the inconsistency is clarified or corrected, especially on operations of meaningful value.
- Keep the version of the contract with the inconsistency, even if a corrected version is presented later — it's relevant evidence if the operation is technically challenged in the future.
The CET was created to protect the borrower through comparable transparency. When the number itself diverges from the basic math that defines it, the protective tool turns into an additional source of opacity — and it's up to the business owner, with simple arithmetic, to be the first to notice it.
This article is part of a series on technical pathologies in business credit operations, based on expert opinions prepared by the author. Individual cases are treated in aggregate and anonymized form, with no identification of the companies or individuals involved.
Frequently asked questions
Can the CET be equal to or lower than the nominal interest rate?
No, whenever the operation includes fees, IOF tax, insurance or other financed charges. By definition, the CET is always equal to or greater than the nominal rate when additional costs exist — if it appears equal or lower, there's a calculation, data-entry, or methodology error.
Does the CET stated in a Brazilian credit contract always account for the grace period?
Not always. You need to explicitly ask the bank whether the stated CET already reflects interest capitalization during the grace period, or whether it was calculated only over the amortization period — which would understate the operation's real cost.
What should I do if I find an inconsistency between the CET and the nominal rate?
Request the CET calculation memo in writing, broken down by component, refuse to sign until the inconsistency is clarified, and keep the version of the contract with the inconsistency as evidence.
Where is CET disclosure required by regulation in Brazil?
CET disclosure is mandatory under Brazilian Central Bank regulation, set out in CMN Resolution 3.517/2007 and related rules, precisely to allow standardized comparison between different credit proposals.
Dr. Lincoln Sposito
Specialist in banking audits and financial forensics, combining the statistical rigor of data science with the analysis of banking-system architectures to dismantle predatory charges against SMEs. Learn more about the expert →