.' , 
SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
'st'tHlh> 
IOfl,;" "f 111' ,;;'r\"f;br~ 
First Regular Session 
) 
) 
) 
'14 
MAY -5 P5 :03 
SENATE 
Senate Bill No. 2196 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
FIXING THE RATES OF INTEREST UPON LOANS AND FORBEARANCES BY 
AMENDING CERTAIN SECTIONS OF ACT NUMBER TWENTY SIX HUNDRED 
AND FIFTY FIVE (ACT NO. 2655). AS AMENDED 
EXPLANATORY NOTE 
In the country today, the present law on usury is Act No. 2655, as 
amended, enacted by the Philippine Legislature on February 24, 1916. This law, 
however, has been rendered ineffective by three successive Presidential 
Decrees, specifically Presidential Decree No. 116 issued on January 29, 1973; 
Presidential Decree No. 858 issued on December 31, 1975; and Presidential 
Decree No. 1684 issued on March 17, 1980 which authorized the Monetary 
Board of the Central Bank of the Philippines to fix and prescribe the maximum 
rate of interest for loans and forbearances in accordance with certain criteria 
reflecting the prevailing economic and social needs. 
, 
Pursuant to this grant of authority, the Central Bank issued Circular No. 
905, Series of 1982, Section 1 of which reads: 
"GENERAL PROVISIONS 
"SEC. 1. 
The rate of interest, including commissions, premiums, 
fees and other charges, on a loan or forbearance of any money, 
goods, or credits, regardless of maturity and whether secured or 
unsecured, that may be charged or collected by any person, 
whether natural or juridical, shall not be subject to any ceiling 
prescribed under or pursuant to the Usury Law, as amended. " 
Thus, with the ceiling on interest rates effectively removed, most private 
individuals, banks and other financial lending institutions have been able to 
charge unconscionably high interest rates for loans to the great detriment of the 
borrower, in particular, and the public, in general. 
It is clear, however, that this practice of charging or taking excessive 
interest rates must be stopped. The provisions of the Usury Law must be re-
imposed in order to afford protection to those who, in their financial difficulties, 
may desperately agree to pay exorbitant interest on loans contracted by them, 
thereby miring them deeper into poverty. It is also time to discourage and punish 
those unscrupulous individuals who take advantage of the misfortune of others. 


· , 
To this end, the approval and passage of this bill is urgently pressed. For 
while this bill seeks to re-impose a ceiling on interest rates, it also recognizes, at 
the same time, the need to have more flexible interest rate ceiling that would be 
truly responsive to the requirements of the ever-changing economic conditions 
and allow for a realistic and sufficient return of loans. 
OY EJERCITO ESTRADA 
Senator 


SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
.s~I111t!? 
(@If,;. of t~. j,,,,.t.r~ 
First Regular Session 
) 
) 
) 
'14 
I1AY -S P5 :03 
SENATE 
Senate Bill No, 2196 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
FIXING THE RATES OF INTEREST UPON LOANS AND FORBEARANCES BY 
AMENDING CERTAIN SECTIONS OF ACT NUMBER TWENTY SIX HUNDRED 
AND FIFTY FIVE (ACT NO. 2655), AS AMENDED 
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 Hundred and Fifty 
Five (Act No. 2655), as amended, is hereby amended to read as 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." 
SEC. 2. Section 1-a of Act No. 2655, as amended, is hereby repealed. 
SEC. 3. Section 2 of Act No. 2655, as amended, is hereby amended to 
read as follows: 
"SEC. 2. 
No persons 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 or advances', where 
such loan or forbearances is secured in whole or in part by a 
mortgage upon real estate the title to which duly is 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 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 may be specified by the Monetary Board." 
SEC. 4. Section 3 of Act No. 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 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 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 than five percentage 
(5%) pOints above the average rate of interest of ninety (90) days 
government or treasury bills within the preceding quarter from the 
loan or renewal thereof is granted." 
SEC. 5. Section 4 of Act No. 2655, as amended, is hereby amended to 
read as follows: 
"SEC. 4. 
No pawnbroker or pawnbroker's agent shall 
directly or indirectly stipulate charge, and 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 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 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 average rate of the interest of ninety (90) days government or 
treasury pawnbroker bills within the preceding quarter. 
A 
pawnbroker's agent shall be considered such, for the benefit of this 
Republic Act, only if he will be duly licensed and has establishment 
open to the public. 
"It shall be unlawful for a pawnbroker or pawnbroker's agent 
to divide the pawn offered by person into two (2) or more fractions 
in order to collect a greater interest than that permitted by this 
Section. 
"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." 


" . 
. . ' 
SEC. 6. Section 4-a of Act No. 2655, as amended, is hereby repealed. 
SEC. 7. Section 4-b of Act No. 2655, as amended, is hereby renumbered 
as Section 4-a. 
SEC. 8. Section 5 of Act No. 2655, as amended, is hereby amended to 
read as follows: 
"SEC. 5. 
In computing the· interest on any obligation, 
promissory note or other instrument 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 judicially claimed, in 
which is 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." 
SEC. 9. Section 7 of Act No. 2655, as amended, is hereby amended to 
read as follows: 
"SEC. 7. 
All covenants and stipUlation contained in 
mortgages, bonds, bills, notes, and conveyances, other contracts or 
evidences 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, 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 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: 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: Provided, fin(fJlly, 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, where there has been no 
intention on the part of the said purchaser to evade the provision of 
this Act and said purchase was not a part of 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." 
SEC. 10. Section 9-a of Act No. 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 average rate of interest of ninety (90) days of 
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 effectively implement the 
provisions of this Act." 
SEC. 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 (P100.00) 
nor more than Two Thousand Pesos (P2,OOO.OO), or imprisonment 
of not less than thirty (30) days nor more than one (1) year, 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, suffer subsidiary imprisonment at the rate of one day for 
every Eight Pesos (PS.OO): Provided, That in case of corporations, 
associations, societies, or companies, the manager, administrator 
or 'gerente' or the persons who has the charge of management or 
administration of the business shall be criminally responsible for 
any violation of this Republic Act." 
SEC 12. Repealing Clause. - All laws, acts, decrees or parts thereof 
inconsistent with the provisions of this Republic Act are hereby repealed. 
SEC 13. Effectivity. - This Republic Act shall take effect after the lapse 
of fifteen (15) days following complete publication in the Official Gazette or in two 
(2) newspapers of general circulation, whichever is earlier. 
Approved,