BMG challenges BB's São Paulo state payroll contract in court

Tuesday, October 11, 2011

Brazilian bank BMG has challenged federally controlled Banco do Brasil's (BB) exclusive payroll lending contract with São Paulo state, local news agency Agência Estado reported.

According to a ruling by a São Paulo judge, BMG will now also be allowed to offer loans to public servants in São Paulo, thus ending the exclusivity that BB enjoyed.

The payroll-linked lending segment has seen very strong growth in the last few years due to the low risk of such loans, for which installments are deducted directly from public servants' paychecks.

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This year, the exclusivity of BB's payroll lending contracts with state governments has been challenged in several states.

BMG is a medium-sized lender with a strong focus on payroll-linked lending. BB is the largest bank in Brazil and Latin America.