Oa
(a _E-Filed
Republic of the Philippines )
HOUSE OF REPRESENTATIVES
Quezon City

TIME 11:22am

NINETEENTH CONGRESS
First Regular Session

House Bill No. _1539

Introduced by Hon. Robert Ace S. Barbers

EXPLANATORY NOTE

CB Circular No. 905, series of 1982, issued by Monetary Board of the Bangko Sentral
ng Pilipinas, has suspended the effectivity of Act No. 2656, as amended, otherwise
known as “The Usury Law’. The Circular has, in effect, allowed the contracting parties
to freely stipulate the interest rate on their transaction provided that the same is not
excessive, unconscionable and exorbitant.

However, predatory creditors are taking advantage of financially desperate members
of society. They set monthly interest rates as much as 5% or higher and the borrower
has no choice but to agree, especially if the loan is for emergency purposes. The
borrower, ultimately, ends up falling into a debt trap due to unconscionable interest
rates.

Nevertheless, the Supreme Court has held in a number of cases that three percent
(3%) per month and higher is excessive, iniquitous, unconscionable and exorbitant. It
has also held that the imposition of an unconscionable rate of interest on a money
debt, even if knowingly and voluntarily assumed, is immoral, unjust and against public
policy.

Although an interest rate of 3% or higher is considered unconscionable and can be
reduced by the court if deemed necessary, involved parties oftentimes choose not to
take their claim to court. The reason is that litigation expenses, on many occasions,
exceed the amount that could be saved from a reduced interest rate.

Thus, this bill seeks to prescribe the maximum rate of interest on loans or forbearance
of any money, goods, or credits, or any obligations consisting of payment of a sum of
money and to provide penalties for violations thereof. This will prevent the predatory
creditors from imposing unconscionable and exorbitant interest rates,

No one shall be unjustly enriched at the expense of another.

In view of the foregoing, immediate approval of this bill is earnest

HON. ROBERT AG
2" District, 9

. BARBERS
igao del Norte

REP. RES

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RECEIVED Z
= DATE July 7, 2022 3

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
First Regular Session

House Bill No. 1539

Introduced by Hon. Robert Ace S. Barbers

AN ACT PRESCRIBING MAXIMUM INTEREST RATES ON LOANS OR
FORBEARANCE OF MONEY, GOODS OR CREDIT OR ANY MONETARY
OBLIGATIONS, AND PROVIDING PENALTIES THEREFOR

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

SECTION 1. Short Title. - This Act shall be known as the “Maximum Interest
Rate Act’

SEC. 2. Declaration of Policy. — It is the policy of the State to protect its citizen
against unfair and unconscionable acts and practices prejudicial to public interest.
Toward this end, this Act seeks to prevent predatory and unscrupulousness creditors
from imposing unconscionable, excessive, iniquitous and exorbitant interest rates on
loans or forbearance of any money, goods, or credits or any obligations consisting in
the payment of a sum of money.

SEC. 3. The rate of interest for the loan or forbearance of any money, goods or
credit, or any obligations consisting in the payment of a sum of money, and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest,
shall be six percent (6%) per annum.

SEC. 4. Maximum Interest Rate — The rate of interest, including commissions,
premiums, fines, penalties, fees and other charges, on a loan or forbearance of any
money, goods, or credits, regardless of maturity and whether secured or unsecured,
or any obligations consisting in the payment of sum of money, that may be charged or
collected by any person, whether natural or juridical, shall not be more than twelve
percent (12%) per annum.

Juridical person shall include, but not limited, to lending company as defined
under Republic Act No. 9474 or Lending Company Regulation Act of 2007, financing
company as defined under Republic Act No. 8556 or Financing Company Act of 1998,
banks as defined under Republic Act No. 8791 or The General Banking Law of 2000,
credit card companies, pawnshops, investments houses, savings and loan
associations, insurance companies, cooperatives, and other similar financial or credit
institutions already regulated by law.

Other charges shall include, but not limited to, transaction fee, finance charges,
cash advance service charge, discount charges, and penalties for late payments.


SEC. 5. Penalties. — Any violation of this law will subject the offender upon
conviction, to an imprisonment of not more than six (6) years or a fine not more than
One Million Pesos (P1,000,000.00), or both, in 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.

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

SEC. 6. Implementing Rules and Regulations. - The Bangko Sentral ng
Pilipinas, within sixty (60) days from the effectivity of this Act, shall promulgate rules
and regulations to effectively implement this Act.

SEC. 7. Repealing Clause. — All laws, orders, issuances, circulars, rules and
regulations or parts thereof, which are inconsistent with the provisions of this Act are
hereby repealed, modified, or amended accordingly.

SEC. 8. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved.