4 
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
S .  No. 
796 
SENATE 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
EXPLANATORY NOTE 
From the old times to this day of free enterprise and competitive businesses, 
charging of excessive interest for loans and forbearance of money, goods or credit is 
largely regarded as oppressive. 
The country’s present law on usury is Republic Act No. 2655, which was 
mended by several Presidential Decrees. One is PD No. 1684 which authorized the 
Monetary Board of the Central Bank of the Philippines to fix and prescribe the 
maximum rate of interest for loans and forbearance in accordance with certain criteria 
reflecting the prevailing economic and social needs. 
This practice of charging excessive interest rate,s must be stopped by re- 
imposing the Usury Law. It is hoped that by doing such, the people who, out of 
desperation agree to pay exorbitant interest to avail of a loan, will be helped. It also 
discourages and punishes those unscrupulous individuals who take advantage of the 
misfortune of others. 
While this measure seeks to re-impose a ceiling on interest rates, it also 
recognizes the need to have more flexible interest rates ceiling, responsive to the 
requirements of the ever-changing economic conditions. 
In view of the foregoing, approval of this bill is urgently pressed. 
.I 
MANUEL B. V LLAR, JR. 
1 


i f 
I 
Pill 
I
_
 
SENATE 
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
'* 
796 
*
I
 
S. No. 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 7 -  
. 
AN ACT 
FIXING THE RATES OF INTEREST UPON LOANS AND FOREEARANCES BY 
AS AMENDED 
AMENDING CERTAIN SECTIONS OF ACT NO. TWENTY-SIX FIFTY-FIVE (2655), 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Section 1 of Act Numbered Twenty-Six Fifty-Five (Act No. 2655), as 
amended, is hereby amended to read, air follows: 
"SEC. 1. The rate of interest for the loan or forbearance of 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 to such rate of interest, shall be twelve percent (12%) 
per annum or such rate as may be prescribed by the Monetary Board of 
the Central Bank of the Philippines for that purpose in accordance with 
the authority hereby granted: Provided, That said maximum rate shall not 
be more than three percentage (3%) points above the average interest rate 
of ninety (90) days government or treasury bills within the quarter 
preceding the Monetary Board's imposition of said maximum rate." 
SECTION 2. Section 1-a of Act No. 2655, as amended, is hereby repealed. 
SECTION 3. Section 2 of Act No. 2655, as amended, is hereby mended to read, 
as follows: 
"SEC. 2. No person or corporation shall directly or'indirectly take 
or receive or agree to charge in money or other property, real or personal, 
or chooses in action, 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, That 


2 
the maximum rate that the parties may charge or agree to charge 
shall not be more than three percentage (3%) points above the average 
interest rate of ninety (90) days government or treasury bills 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 
ray 
be specified by the Monetary Board." 
SECTION 4. Section 3 of Act No. 2655, as amended, is hereby mended 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, goods, or charge on credits, credit cards and other 
cash advance arrangements, where such loan 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 many charge or agree to charge shall not 
be more than five percentage (5%) points above the average rate of 
interest of ninety (90) days government or treasury bills within the 
preceding quarter form the time the loan or renewal thereof is granted." 
SECTION 5. Section 4 of Act No. 2655, as mended, 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 sumor value for any loan or forbearance than three percent (3%) 
per month if the amount lent is leas than Eight hundred pesos (P800.00), 
five percent (5%) per month when the sum is Eight hundred pesos 
(P800.00) or more but not exceeding Two thousand five hundred pesos 
(P2, 500.00); and fifteen percent (15%) per annum when it is more than 
the mount last mentioned; or as may be agreed upon 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 
average rate of interest of ninety (90) days government or treasury bills 
within the preceding quarter. 
A pawnbroker or pawnbroker's agent 
shall be considered such, for the benefit of this Republic Act, only if he 
be duly licensed and has an establishment open to the public. 
It shall be unlawful for a pawnbroker or 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 that permitted by this Section. 


3 
"It shall also be unlawful for 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." 
SECTION 6. Section 4-a of Act No. 2655, an amended, is hereby repealed. 
SECTION 7. Section 4-b of Act No. 2655 as amended, is hereby re-numbered as 
Section 4-A. 
SECTION 
8. Section 5 of Act No. 2655, as mended, is hereby mended to 
read as follows: 
"SEC. 5. In computing the interest on any obligation, promissory 
note or other instrument or contract, 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 average rate of interest of ninety 
(90) days government or treasury bills within the preceding quarter. No 
person or corporation shall require interest to be paid in advance for a 
period of more than three (3) 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." 
SECTION 9. Section 7 of Act No. 2655, as amended, is hereby amended to read 
as follows: 
"SEC. 7. All covenants and stipulation contained in conveyances, 
mortgages, bonds, bills, notes, and other contracts or evidence of debts, 
and all deposits of goods, or other things, whereupon or whereby there 
shall be stipulated, charged, demanded, reserved, secured, taken, or 
received, directly or indirectly, 
rate of interest or greater 
sum or value for the loan or the renewal thereof or forbearance of money, 
goods, or credits than is hereinbefore allowed, shall be void: Provided, 
however, That no mere clerical error in the computation of interest, 
made, without intent to evade any of the provisions of this Act, shall 
render the stipulation or covenant pertaining to the rate of interest void: 
a higher 


4 
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 purchaser of a negotiable mercantile paper, 
usurious or otherwise, for valuable consideration before maturity, when 
there has been no intention on the part of saidpurchaser to evade the 
provisions of this Act and said purchase was not a part of the original 
usurious transaction. 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 cost and such 
attorney's fees as may be allowed by the court." 
SECTION 10. Section 9-a of Act No. 2655), as amended, is hereby amended to 
read apt follows: 
"SEC. 9-a. The Monetary Board shall make known to the 
public, 
through publication in two (2) newspapers of general circulation, the 
average rate of interest of ninety (90) days government or treasury bills 
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 this Act." 
SECTION 11. Section 10 of Act No. 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 pesos (PlOO.OO), nor more than 
Two thousand pesos (P2,000.00), or imprisonment for not less than 
thirty (30) days nor sore then one (1) yearn or both, in the discretion of 
the court, 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 
shall be criminally responsible for away violation of this Republic Act." 


5 
SECTION 12. All laws, acts, decrees or parts thereof, inconsistent with the 
provision of this Republic Act are hereby repealed. 
SECTION 13. This Republic Act shall take effect after the lapse of fifteen (15) 
days following its complete publication in the Official Gazette or in two (2) newspapers 
of general circulation, whichever is earlier. 
Approved,