In a significant move to combat fraud, the National Institute of Social Security (INSS) has indefinitely blocked payroll loans for retirees and pensioners. This announcement, made by INSS President Gilberto Waller Júnior, follows investigations by the Federal Police that uncovered a scheme diverting a staggering R$ 6.3 billion from beneficiaries.
The decision to suspend the loans is in line with directives from the Tribunal de Contas da União (TCU), which mandated the halt of benefits for loans until beneficiaries request unblocking. Waller stated, "I determine the blocking of benefits for the registration of new payroll loan discounts for all insured persons of the National Institute of Social Security, regardless of the date of concession of the benefit." This sweeping measure aims to protect retirees from further exploitation amid ongoing investigations.
The fraudulent scheme involved the automatic enrollment of retirees and pensioners into class entities—primarily unions and associations—without their consent. These organizations charged monthly fees directly from benefits paid by the INSS through unauthorized payroll deductions, utilizing codes linked to Dataprev. It is estimated that more than R$ 6 billion was siphoned off between 2019 and 2024, affecting around 1.2 million retirees, according to internal INSS audits.
Many retirees, who often live on minimum wage, reported that these unauthorized deductions severely compromised their livelihoods. The amounts deducted ranged from R$ 8 to R$ 50 monthly, but when multiplied across years and numerous beneficiaries, the losses became astronomical. Although the entities involved claimed that retirees authorized these deductions, investigations revealed a near-total lack of supporting documentation. In some instances, forged documents and digitally manipulated affiliations were identified.
In response to the gravity of the situation, the federal government enacted a temporary suspension of payroll loans for INSS beneficiaries in April 2025 as a preventative measure. This suspension allows for a comprehensive review of the payroll deduction system and halts the activities of suspicious entities. The decision stirred controversy, particularly affecting beneficiaries who rely on credit for urgent expenses.
President Lula characterized the fraud as "a betrayal of the Brazilian people" and authorized the Advocacia-Geral da União (AGU) to pursue legal action against the implicated entities, seeking the recovery of the misappropriated funds. Concurrently, the TCU and the Controladoria-Geral da União (CGU) have initiated parallel investigations into the matter.
A sensitive aspect of the case is the indirect involvement of Frei Chico, President Lula's older brother and former leader of the Sindicato Nacional dos Aposentados (Sindnapi), based in São Paulo. Documents indicated that Sindnapi received diverted funds through unauthorized affiliations. While there is no direct evidence that Frei Chico benefited from the scheme, the political association has drawn negative attention and accusations of institutional "blindness" from the opposition. The government has emphasized that the practices under investigation began during the Bolsonaro administration, asserting that current changes aim to eradicate these inherited structures.
To address the plight of affected retirees, the government announced that improperly deducted amounts would be reimbursed. A task force comprised of the INSS, AGU, and Dataprev has been established to review each case individually. The Meu INSS service has been reinforced, and in-person channels at agencies are now accepting revision requests. The AGU has indicated that initial reimbursements are expected to commence in May 2025, prioritizing cases with the greatest social vulnerability.
Measures to prevent future fraud include a complete review of agreements between the INSS and representative entities, blocking suspicious deduction codes, creating a dual-factor authentication system for authorizing deductions, and implementing real-time monitoring of new enrollments and changes to payslips. Additionally, a new legal framework for payroll loans is under consideration, which would impose stricter rules regarding authorization and oversight.
The suspension of payroll loans has broader economic and social implications beyond the direct harm to retirees. The financial market, particularly banks and financial institutions that provide credit to seniors, has already felt the impact, with estimates indicating a drop of over R$ 1 billion in credit operations in April alone. Economists warn of potential repercussions on family consumption and the retail sector. However, the exposure of this fraudulent scheme has sparked a vital discussion about transparency in public systems, elder protection, and institutional ethics.
On May 8, 2025, AGU's Jorge Messias announced that the government would seek to block R$ 2.56 billion from 12 associations implicated in the fraud scheme to compensate the affected retirees and pensioners. These entities are believed to be at the core of the irregular deductions and are suspected of having strong evidence of fraud and payments to public officials.
The AGU's legal action will also request the breaking of banking and tax secrecy for these associations and their leaders, along with the temporary suspension of their activities and the seizure of the involved parties' passports. Messias noted, "These entities were created under different governments and accredited to access the payroll deductions of retirees and pensioners."
In a follow-up to these developments, Waller clarified that on May 13, 2025, the INSS would notify insured individuals who experienced associative discounts through the Meu INSS channel. The following day, retirees or pensioners who do not recognize the discount will be able to report it through the system, which will automatically generate a charge to the respective entity. The association will then have 15 business days to provide documentation proving the link. If it fails to do so, it will have an additional 15 business days to deposit the amount back to the INSS, which will then transfer the funds to the insured through their benefit accounts.
Furthermore, on May 8, 2025, the INSS communicated to 27 million insured parties that they had not experienced any associative discounts in their benefits, aiming to reassure those unaffected by the fraud.