EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE 
S. No. 2428
E-FILED
October 5. 2021
11:04 am
time:
Introduced by Senator Manuel "Lito" M. Lapid
AN ACT
CAPACITATING EMPLOYEES TO AVAIL OF LOANS AND IMPROVE CREDIT 
SCORES BY ENTERING INTO SALARY DEDUCTION AGREEMENT WITH 
EMPLOYERS AND CREDITOR BANKS WHERE THEY MAINTAIN A PAYROLL 
ACCOUNT, AMENDING FOR ITS PURPOSE ARTICLE 113 OF PRESIDENTIAL 
DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS "THE LABOR
CODE OF THE PHILIPPINES"
EXPLANATORY NOTE
It is undeniable that financial literacy in the country needs improvement. Even 
the basic concepts in finance are alien to many Filipinos. One of these unfamiliar 
concepts is the credit score. The credit score depicts one's creditworthiness or ability 
to pay off a loan in a timely manner. This is a three-digit number that is based on 
several factors such as, but not limited to, credit payment history, types of loans, and 
length of credit history.
Building a good credit score offers many benefits and advantages such as 
qualifying for better interest rates, higher chance for loan approval, and more 
negotiating power. However, building a credit score also requires engagement or 
involvement with financial institutions, which often means more required documents, 
stricter qualifications, longer period for processing, higher probability of disapproval, 
among others. These are some of the common reasons why many Filipinos resort to 
unregulated loan sharks that offer unconscionable and abusive rates. This needs to 
be addressed especially now that the pandemic has brought unimaginable challenges


to everyone which significantly increased the number of applications, actual and 
potential, for loans in order to cope with the same.
Thus, this bill seeks to allow salary deduction agreement with employers and 
creditor banks where they maintain their payroll account to help the Filipino employees 
avail of loans with regulated institutions as well as improve their credit scores.
In view of this, early passage of this bill is sought.
** LITOn M. LAPID
Senator


EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE
S. No. 2428
FILED
October
BILL
Introduced by Senator Manuel "Lito" M. Lapid
AN ACT
CAPACITATING EMPLOYEES TO AVAIL OF LOANS AND IMPROVE CREDIT 
SCORES BY ENTERING INTO SALARY DEDUCTION AGREEMENT WITH 
EMPLOYERS AND CREDITOR BANKS WHERE THEY MAINTAIN A PAYROLL 
ACCOUNT, AMENDING FOR ITS PURPOSE ARTICLE 113 OF PRESIDENTIAL 
DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS "THE LABOR
CODE OF THE PHILIPPINES"
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled:
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Section 1. Short Title. - This Act shall be known as the ''Loan Capacity and 
Credit Score Improvement Act"
Section 2. Article 113 of Presidential Decree No. 442, as amended, otherwise 
known as "The Labor Code of the Philippines", is hereby further amended to read to 
as follows:
"Article 113. Wage deduction. No employee, in his own behalf or 
in behalf of any person, shall make any deduction from the wages of his 
employees, except:
In cases where the worker is insured with his consent by the 
employer, and the deduction is to recompense the employer for the


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amount paid by him as premium on the insurance;
For union dues, in cases where the right of the worker or his union 
to check-off has been recognized by the employer or authorized in writing 
by the individual worker concerned;
"IN CASES WHERE THE EMPLOYEE, EMPLOYER, AND BANK 
WHERE PAYROLL IS MAINTAINED, ENTER INTO A SALARY 
DEDUCTION AGREEMENT IN WRITING, FOR THE PURPOSE OF 
PAYING LOANS CONTRACTED BY THE EMPLOYEE WITH THE 
SAME BANK. IN NO CASE SHALL THE DEDUCTION EXCEED 1/3 
OF THE TOTAL MONTHLY COMPENSATION OF THE EMPLOYEE."
In cases where the employer is authorized by law or regulations 
issued by the Secretary of Labor and Employment."
Section 3. Implementing Rules and Regulations. - Within sixty (60) days from 
the effectivity of this Act, the Secretary of Labor and Employment, shall promulgate 
the necessary rules and regulations for the effective implementation of this Act.
Section 4. Separability Clause. - If any provision or part of this Act is declared 
invalid or unconstitutional, the remaining parts or provisions not affected shall remain 
in full force and effect.
Section 5. Repealing Clause. - All laws, decrees, orders, rules and regulations 
and other issuances or parts thereof which are inconsistent with the provisions of this 
Act are hereby repealed or amended accordingly.
Section 6. Effectivity Clause. - This Act shall take effect fifteen (15) days after 
its publication in the Official Gazette or in any newspaper of general circulation.
Approved,