Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

House Bill No._ 8330

Introduced by Hon. Giorgidi B. Aggabao

EXPLANATORY NOTE

The present law on usury, R.A. No. 2655, enacted during the American occupation,
is a dead statute. This law has been rendered moribund by P.D.s 116, 358, and
1684, which empowered the Monetary Board of the Bangko Sentral Ng Pilipinas to
prescribe the interest rates on loans and forbearances over and above the
prescribed rate fixed in the original law. Unfortunately, the Monetary Board has not
done so, opting instead to the leave the interest rates to market forces, that is, to
whatever the parties may agree to stipulate. Consequently, many debtors especially
those in the cusp of emergencies are asked to pay interests at 10% per month, or a
whopping 120% per annum, owing to the cupidity of most creditors.

This bill primarily seeks to put a cap on interest rate by ensuring that the allowable
interest a lender may collect, shall be based exclusively on a benchmark interest
rate. As proposed, the interest rate is fixed at 3% above the 91-day treasury bill rate
(for secured loans) and 5% above the 91-day treasury bill rate (for unsecured loans).
Additionally, this bill seeks to cover interests on credit cards. By using a fixed
benchmark, the rate of interest is guaranteed to be competitive and attuned to the
obtaining economic realities.

It is hoped that this bill will help the small borrowers, primarily the farmers who rely
solely on credit for capital. It is also hoped, that this bill will prevent borrowers being
trapped in the quagmire of debt by making interest rates reasonable and humane.

In view of the foregoing, early passage of this bill is earnestly requested.

GIORGI = z Kscanno


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

House Bill No.__ 3330

Introduced by Hon. Giorgidi B. Aggabao

PRESCRIBING THE RATES oF INTEREST UPON LOANS AND
FORBEARANCES BY AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NO.
TWENTY SIX HUNDRED AND FIFTY FIVE, AS AMENDED, OTHERWISE KNOWN
AS THE USURY LAW

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled

Section 1. Section 1 of Republic Act No. Twenty Six Hundred and Fifty Five
(R.A. 2655), as amended, is hereby amended to read as follows:

“Sec. 1, The rate of interest for the loan of forbearance on any money,
goods, or credits or CHARGES ON CREDIT CARDS AND OTHER CASH
ADVANCE ARRANGEMENTS, and the rate allowed in judgments, in the
absence of express contract as to such rate of interest shall be TWELVE (12
%) percent per annum or such rate as may be prescribed by the monetary
Board of the BANGKO SENTRAL NG PILIPINAS for that purpose in
accordance with the authority herby granted: PROVIDED, THAT SAID
MAXIMUM RATE SHALL NOT BE MORE THAN THREE PERCENTAGE (3
%) POINTS ABOVE THE NINETY ONE (91) DAY TREASURY BILL RATES
WITHIN THE QUARTER PRECEDING THE MONETARY BOARD'S

IMPOSITION OF SAID MAXIMUM RATE.”


SEC. 2. Section 2 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.
2655), as amended, is hereby amended to read as follows:

“Sec. 2. No person or corporation shalll directly or indirectly take
or receive OR AGREE TO CHARGE in money or other property, real
or personal or chooses in action, at a higher rate of interest or greater
sum or value, including commissions, premiums, fines, penalties,
CHARGES AND OTHER SURCHARGES, for the loan or forbearance
of money, goods, credits, OR CASH ADVANCES OR RENEWAL
THEREOF, where such loan or forbearance is secured in whole or in
part by a mortgage upon real estate the title to which is duly registered,
or by any document conveying such real estate or an interest therein
OR BY CHATTEL MORTGAGE, than FIFTEEN PERCENT (15%) per
annum or such rate AS MAY BE AGREED UPON BY THE PARTIES
PROVIDED IT IS NOT BE MORE THAN THREE (3%) PERCENTAGE
POINTS ABOVE THE NINETY ONE (91) DAY TREASURY BILL
RATES WITHIN THE PRECEDING QUARTER: Provided, further, that
the rate of interest under this section or the maximum rate of interest
that may be AGREED UPON BY THE PARTIES may likewise apply to
loans secured by other types of security as may be specified by the
Monetary Board.”
SEC. 3. Section 3 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.

2655), as amended, is hereby amended to read as follows.

“Sec. 3. No person or corporation shall directly or indirectly demand,

take, receive or agree to charge in money or other property, real or personal,

a higher rate or greater sum or value for the loan or forbearance of money,


2655),

goods, or CHARGES ON credits, CREDIT CARDS AND OTHER CASH
ADVANCE ARRANGEMENTS, where such loans or forbearance is not
secured as provided in section two(2) hereof, than SIXTEEN percent (16 %)
per annum or as may be agreed upon by the parties: PROVIDED, THAT THE
MAXIMUM RATE THAT THE PARTIES MAY CHARGE OR AGREE TO
CHARGE SHALL NOT BE MORE THAT FIVE PERCENTAGE (5 %) POINTS
ABOVE THE NINETY ONE (91) DAY TREASURY BILL RATE WITHIN THE
PRECEDING QUARTER FROM THE TIME THE LOAN OR RENEWAL
THEREOF IS GRANTED.”

SEC. 4, Section 4 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.
as amended, is hereby amended to read as follows:

“Sec. 4. No pawnbroker or pawnbroker’s agent shall directly or
indirectly stipulate, charge, demand, take or receive any higher rate or greater
sum or value for any loan or forbearance than THREE PERCENT (3%) per
month if the amount lent is less that ONE THOUSAND PESOS (P1,000.00) or
more but not exceeding TWO THOUSAND FIVE HUNDRED (P 2,500.00):
and FIFTEEN percent (15%) per annum WHEN it is more that the amount
last mentioned; or AS MAY BE AGREED UPON BY THE PARTIES;
PROVIDED, THAT THE MAXIMUM RATE THAT THE PARTIES MAY
CHARGE OR AGREE TO CHARGE SHALL NOT BE MORE THAN THREE
PERCENTAGE (3%) POINTS ABOVE THE NINETY ONE (91) DAY
TREASURY BILL RATE WITHIN THE PRECEDING QUARTER. A
pawnbroker or a pawnbroker's agent shall be considered such, for the
benefits of this Republic Act, only if he be duly licensed and has an

establishment open to the public.


2655),

2655),

It shall LIKEWISE be unlawful for a pawnbroker's agent to divide the
pawn offered by a person into two (2) or more fractions in order to collect a
greater interest than the permitted by this section.

It shall also be unlawful for a pawnbroker or pawnbroker's agent to
require the pawner to pay additional charge as insurance premium for the
safekeeping and conservation of the article pawned.”

SEC. 5. Section 5 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.
as amended, is hereby amended to read as follows

Sec. 5. In computing the interest on any obligation, promissory note or
other instrument or contraption, compound interest shall not be reckoned,
except by agreement; Provided, that whenever compound interest is agreed
upon, the effective rate of interest charged by the creditor shall not exceed the
equivalent of the maximum rate prescribed by the Monetary Board and
allowed herein, or in default thereof, whenever the debt is judicially claimed, in
which last case, it shall draw TWELVE percent (12%) per annum interest or
such rate as may be prescribed by the Monetary Board WHICH RATE
SHALL NOT BE MORE THAN THREE PERCENTAGE (3%) POINTS
ABOVE THE NINETY ONE (91) DAY TREASURY BILL RATE WITHIN THE
PRECEDING QUARTER. No Person or corporation shall require interest to
be paid in advance for a period of more than TWO (2) MONTHS: Provided,
however, that whenever interest is paid in advance, the effective rate of
interest charged by the creditor shall not exceed the equivalent of the
maximum ALLOWED BY THIS REPUBLIC ACT.”

SEC. 6. Section 7 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.

as amended, is hereby amended to read as follows:


“Sec. 7. All covenants and stipulations contained in conveyances,
mortgages, bonds, bills, notes and other contracts or evidence of debts, and
all deposits of goods, or other goods, or other things, whereupon or whereby
there shall be stipulated, charged, demanded, reserved, secured, taken or
received, directly or indirectly, a higher rate of interest or greater sum or value
for the loan or the renewal THEREOF or forbearance of money, goods, or
credits than is herein before allowed, shall be void: Provided, however, that no
merely clerical error in the computation of interest, made without intent to
evade any of the provisions of this Act, shall render THE STIPULATION OR
AGREEMENT PERTAINING TO THE RATE OF INTEREST void: Provided,
further, That the rate of interest agreed upon at the time the loan arrangement
is entered into, which RATE shall not exceed the maximum allowed HEREIN
shall prevail notwithstanding subsequent changes in the maximum rates that
may be made by LAW, UNLESS THE PARTIES TO THE LOAN
AGREEMENT, THE PROCEEDS OF WHICH MAY BE AVAILED OF
PARTIALLY OR FULLY AT SOME FUTURE TIME, STIPULATE
OTHERWISE: and Provided, finally, that nothing herein contained shall be
construed to prevent the purchase by an innocent purchase of a negotiable
mercantile paper, usurious or otherwise, for valuable consideration before
maturity, when there has been no intention on the part of said purchaser to
evade the provisions of this Act and said purchase.

In any case, however, the maker of said note shall have the right to
recover from said original holder the whole interest paid by him thereon and,
in case of litigation, also the costs and such attorney's fees as may be allowed

by the court.”


SEC. 7. Section 9-A of Republic Act No. Twenty Six Hundred Fifty Five (R.A
2655), as amended, is hereby amended to read as follows:

“Sec. 9-A. The Monetary Board shall MAKE KNOWN TO THE PUBLIC
THROUGH PUBLICATION IN TWO (2) NEWSPAPERS OF GENERAL
CIRCULATION, THE NINETY ONE (91) DAY TREASURY BILL RATE
EVERY QUARTER FOR THE PUBLIC’S INFORMATION AND EASY
REFERENCE, AND promulgate such rules and regulations as may be
necessary to implement effectively the provisions of the Act.”

SEC. 8. Section 10 of Republic Act No. Twenty Six Hundred Fifty Five (R.A
2655), as amended, is hereby amended to read as follows:

“Sec. 10. Without prejudice to the proper civil action, violation of
this Act and the implementing rules and regulations promulgated by the
Monetary Board shall be subject to criminal prosecution and the guilty person
shall, upon conviction, be sentenced to a fine of not less than ONE
HUNDRED THOUSAND pesos (P100,000.00), nor more that TWO
HUNDRED THOUSAND pesos (P200,000.00), AND imprisonment for not
less than one (1) year nor more than six (6) years, and to return the entire
sum received as interest from the party aggrieved, and in the case of non-
payment, to suffer subsidiary imprisonment at the rate of one (1) day for every
EIGHT pesos (P8.00); Provided, That, in case of corporations, associations,
societies, or companies, the manager, administrator, or ‘gerente’ OR THE
PERSON WHO HAS CHARGE OF THE MANAGEMENT OR
ADMINISTRATION OF THE BUSINESS, AND WHO ARE DIRECTLY

RESPONSIBLE FOR CAUSING INTEREST RATES ABOVE THE LEVEL


HEREIN PROVIDED TO BE CHARGED shall be criminally responsible for

any violation of this Republic Act.

SEC. 9. All laws, Acts, decrees, or parts thereof, inconsistent with the
provisions of this Act are hereby repealed and or modified accordingly.

SEC. 10. This Act shall take effect fifteen (15) day following its publication in
the Official Gazette or in at least two (2) newspapers of general circulation.

Approved.