Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

INETEENTH CONGRESS
First Regular Session

1500

House Bill No.

Introduced by Honorable Florida P. Robes

EXPLANATORY NOTE

The COVID-19 pandemic has caused an unprecedented human and health crisis. It has
likewise triggered an economic downturn that will likely cause a recession in many countries
around the world, including the Philippines, Bangko Sentral ng Pilipinas Governor Benjamin
Diokno had earlier made a GDP forecast for the country of -1% to 0 percent as a result of the
health emergency. Even with the modification or lifting of the Enhanced Community Quarantine,
many Filipinos are expected to lose their jobs as a result of many businesses closing or slowing
down as a result of the pandemic.

Indeed there is great uncertainty for everyone. To help cushion the impact of the financial
instability for all Filipinos and businesses, especially Micro, Small and Medium Enterprises
(MSMESs), there is need to put a limit on interest rates on loans, credits and all forbearances.

The country’s “Usury Law” under Republic Act No. 2655 which caps interest rate to not
more than 12% per annum has been suspended by the Bangko Sentral ng Pilipinas when it issued
Circular No. 902 Series of 1982 which removed the ceiling on interest rates. This enabled banks
and other lending institutions to freely impose higher interest rates that would cause the amount of
the debt to balloon to an outrageous amount, more than three times the principal debt

A report by the Securities and Exchange Commission (SEC) showed that because of the
suspension of the Usury Law, lending and financing companies charge as much as 2.5% interest
per day on top of the other fees and charges


In these tough times, the imposition of usurious and unconscionable interest rates should
be made illegal because it has oftentimes led to abuse and more sufferings to hapless borrowers.

In other countries, their interest rates are capped. In the United States, where regulations
on interest rates vary across states, several jurisdictions put a limit in their interest rates like New
York (25%), New Jersey (30%), Arkansas (17%), among others,

In these extraordinary and difficult times when every Filipino struggle to survive and get
out of the physical, emotional, psychological and financial quagmire caused by Covid-19, there is
an urgent need to limit the interest rates to provide support to cash-strapped individuals and protect
them from excessive interest rates. This will likewise give relief to businesses, especially MSMEs,
by making loans affordable and accessible to enable them to jumpstart their operations.

Putting a ceiling on interest rates will put an end to unconscionable and oppressive loan
arrangements especially in these trying times. This will likewise discourage predatory lending and
punish unscrupulous lending firms and individuals who take advantage of the desperation of
people and their misfortunes.

In view of the foregoing, the passage of this bill is earnestly sought

FLORIDA P. ROBES


Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City

NINETEENTH CONGRESS
First Regular Session

1500

House Bill No.

Introduced by Honorable Florida P. Robes

AN ACT
PUTTING A CEILING ON INTEREST RATES UPON LOANS AND FORBEARANCES
AND PRESCRIBING PENALTIES FOR VIOLATION THEREOF

SECTION 1. Short Title. — This Act shall be known as the “Interest Rates Ceiling Act of 2020.”

SECTION 2. Declaration of Policy. — It is the policy of the State to promote a just and dynamic
social order that will ensure the prosperity and independence of the country and free the people
from poverty through policies that provide adequate social services , promote full employment, a
rising standard of living, and an improved quality of life for all. Toward this end, this Act seeks to
set a reasonable and conscionable ceiling on interest rates charged by lending and financing
institutions on loans or forbearance of any money, goods or credit

SECTION 3. Ceiling on Interest Rates on Business Transactions. — All lending institutions and
financing companies shall charge an interest of not more than point five percent (.5%) per month
or six percent (6%) per annum on loans or any forbearance of money, goods or credit.

Charges for late payment and other fees charged by the lending and financing institutions
shall not exceed point five percent (.5%) per month or six percent (6%) per annum on such loans
or any forbearance of money, goods or credit.

For purposes of this Act, lending institutions shall include, but not limited to, banks, credits
card companies, pawnshops, savings and loan associations, brokerage firms, mortgage companies,
investment companies, insurance firms, credit unions, cooperatives, partnerships, lenders or
private individuals engaged in lending.


SECTION 4. Penalties. ~ Any person who shall violate Section 3 of this Act shall be punished
by imprisonment of not less than six (6) months but not more than six (6) years or a fine of not
less than One Hundred Thousand pesos (P100,000.00) but not more than Two Million pesos
(P2,000,000.00) or both, at the discretion of the court.

If the offender is corporation, partnership, association 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 canceled or
revoked

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

SECTION 5. Implementing Rules and Regulations. - To implement provisions of this Act, the
National Committee on the Filipino Family, shall promulgate the rules and regulations within
ninety (90) days after the effectivity of this Act

SECTION 6. Separability Clause.— If any part or provision of the Act shall be held
unconstitutional or invalid, other Provisions hereof which are not affected hereby shall continue
to be in full force and effect.

SECTION 7. Repealing Clause. ~ All laws, decrees, rules and regulation inconsistent with the
provision of this Act hereby repealed or modified accordingly

SECTION 12. Effectivity. — This shall take effect after fifteen (15) days from its publication in
two (2) national newspaper of general circulation.

Approved.