Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regutae Session

HOUSE BILLNo. 49.17

Introduced by Rep. TEDDY A. CASINO

EXPLANATORY NOTE

This bill seeks to set a ceiling on interest rates charged by lending instirutions for loans or
any forbearance of money, goods of credit and to prescribe penalties for violation thereof,

Republic Act (RA) No. 2655, otherwise known as the “Lisury Law,” was enacted in 1916, It
was amended by Presidential Decree No. 116, which provides, among others, that the legal
rate of interest for the loan ot forbearance of any money, woods or credits, where such loan
or renewal of forbearance is secured in whole ot in part by a mortgage tpon real estate the
tide to which is duly registered, in the absence of express contract as to such rate of interest,
shall be 12% per annum. Any amount of interest paid or stipulated (o be paid in excess of
that fixed by law is considered usurious, therefore, unlawful,

In December 1982, however, then Central Bank of the Philippines, now renamed Bangko
Sentral ng Pilipinas, issued Cizcular No. 905, Series of 1982 (78 Of Gaz. 7336) effectively
suspending RA 2655 by removing the ceiling on interest rates, In the case of Liam Law 6s.
Obmpic Saw Milt (G.R. L-30771, May 28, 1984), the Supreme Court held that the Usury Law
és legally inexistent, hence, higher inrerest can be charged as lender and borrower may agree
upon the rare of interest. ‘Thus, with the suspension of the Usury Law and the removal of
interest ceilings, banks and other lending institutions are free ta impose higher interest cates
thar would cause the amouat of debi to balloon 0 an outrageous amount more than three
times the principal debt. On average, lending institutions charge 3.75% or even 10% interest
rate per month which are unconscionable, oppressive and prejudicial to the economic
interest of the public.

To stop this nefatious practice, this bill proposes that an interest rate of one percent (1%)
per month or twelve percent (12 %) per annum be charged on all Jans or any forbearance
‘of moncy, goods or credit, such rate being deemed to be appropriate and equitable as
enunciated in the recent case of Mavalinao ws. Bank of Philippine Islands (G.R. No. 175490,
September 17, 2009). tn that case, the Supreme Court held that interest eates of three percent
(3%) per month and higher arc iniquitous, unconscionable and exorbitant and therefore
void. The Court ruled, in part, that an intcrest rate of one percent (1%) per month or twelve
percent (12%) per annum is more appropriate and equitable.

Hopefully, by setting the said ceiling on interest rates, the people who, out of desperation
agree ro pay exorbitant interest to avail a loan, will be helped and protected. Tt will encourage
and help small investors and entrepreneurs to apply for Joans and will help level dhe playing
field between big and smal! investors. It will also discourage and punish unscrupulous
individuals who take advantage of the misfocune of others.



In view of the foregoing, immediate approval of this bill is earnestly cequested.

Approved,

—T

aft. C-aed
TEDDY A. CASINO.
Bayan Muna Party-list


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session
4917

HOUSE BILL No.

Introduced by Rep. TEDDY A. CASINO

AN ACT
SETTING A CEN.ING ON INTEREST RATES CHARGED BY LENDING
INSTITUTIONS FOR LOANS OR ANY FORBEARANCE OF MONEY, GOODS
OR CREDIT AND PRESCRIBING PENALTIES FOR VIOLATION THEREOF

Be it enacted by the Senate and House of Representatives in Congress assembled:
SECTION L. Short Title, — This Act shall be known as the “Interest Rates ‘Regulation Ack.”

SECTION 2, Declaration of Policy. — Ic is the policy of the State to protect, promote and
regulate the economic interest of the people, Toward this end, this Act seeks to set a
reasonable ceiling on interest rates charged by lending institutions on loans or forbearance
of any money, goods or credit.

SECTION 3. Ceiling on Imerest Rates on Business Transactions. — All lending
institutions shail charge an interest rate of not more than one percent (1%) per month or
twelve percent (12%) pet annum on loans or any forbearance of money, goods or credit.

For purposes of this Act, “nding institution?” shall include, but not limited to, banks, credit
card companies, pawnshops, savings and loan associations, credit unions, cooperatives or
private individuals.

SECTION 4. Penalties. — Any person who shall viclate Section 3 of this Act shall, upon
conviction, be punished by imprisonment of not less than three (3) months but not more
than six (6) months or a fine of nor Jess than Ten thousand pesos (P'10,000.00} but not more

than Fifty thousand pesos (P50,000.00), or both such imprisonment and fine, at the
discretion of the court.

In case of a partnership, association, corporation or any juridical person, the penalty shall be
imposed upon the president, treasurer or any other officer or person responsible for the
Violation. In addition, the license to operate the business establishment shall be suspended
for one (1) year for the first offense and cancelled for the second offense.

Hf the offender is an alien, he shall, after service of sentence, be deported immediately
without further proceedings.


SECTION 5. Implementing Rules and Regulations, —'Vbe Bangko Sentral ng Pilipinas
shall, within sixty (60) days from the effectivity of this Act, issue niles and regulations as may
be necessary for the effective implementation of this Act

SECTION 6. Repeating Clause. — All laws, decrees, orders, rules and regulations, and

other issnances or parts thereof inconsistent with this Act are hereby repealed nr modified
accordingly

SECTION 7. Effectivity. — This Act shall take effect fifteen (15) days after its publication
in the Offidal Gaggtte or in tvvo (2) national newspapers of general circulation,

Approved,