Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
EIGHTEENTH CONGRESS 
Third Regular Session 
House Bill No. ____________ 
Introduced by: REPRESENTATIVE IRENE GAY F. SAULOG 
EXPLANATORY NOTE 
The lifting of the ceilings for interest rates by the Monetary Board pursuant to 
the issuance of its CB Circular No. 905 and upholding the parties’ freedom of contract 
to agree freely on the rate of interest has led to the imposition of an unconscionable 
rates of interest or finance charges on money debts. As such, many of the borrowers 
were enslaved by their creditors and became victims of loan sharks engaged in 
usurious practices.  
Borrowers of a “five-six” lending scheme pay a hefty interest rate of at least 20 
percent a month, which the public, especially those people who are mostly poor and 
underprivileged, are nevertheless forced to tap either because they do not have the 
capacity or means to go through the tedious loan processing of banks, or do not have 
the documents and collateral required when borrowing from traditional financial 
institutions. 
Furthermore, with the advancement of technology, these loan sharks have 
widened their coverage and are now operating through their respective mobile 
platforms imposing an interest rate of 2 percent a day or 60 percent a month, targeting 
the public who were left with no other option but to consent in order to strive and 
survive during this time of pandemic.  
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Worse, even traditional financial institutions like banks, impose exorbitant 
interest rates. BSP data will show that the average annualized interest rate on credit 
card receivables issued by these banks ranges from 18% to 58% from January to June 
2020.  
While the Supreme Court already made a pronouncement that “The imposition 
of an unconscionable rate of interest on a money debt, even if knowingly and 
voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation 
and an iniquitous deprivation of property, repulsive to the common sense of man. It 
has no support in law, in principles of justice, or in the human conscience nor is there 
any reason whatsoever which may justify such imposition as righteous and as one that 
may be sustained within the sphere of public or private morals.”1, there have been no 
law or any pronouncement, as to what stipulated interest rates are excessive, 
iniquitous, unconscionable and exorbitant. 
There is no clear rule in determining whether an interest rate is unconscionable. 
It "may be iniquitous and unconscionable in one case but may be totally just and 
equitable in another."2 As observed by Justice Leonen in his dissenting and concurring 
opinion, “This Court had previously found that the stipulated monthly interest rates of 
2.5%, five percent (5%), 14 5.5%, six percent (6%), and 10% were unconscionable. 
However, in Toledo v. Hyden, this Court upheld as valid a monthly interest rate of six 
percent (6%) to seven percent (7%). It noted that in that case, the borrower was not in 
dire need of money when she obtained a loan, and it was the borrower herself who was 
guilty of inequitable acts”3 
While the courts are empowered to reduce interests which they consider as 
unconscionable, the delay in the proceedings and the expenses, by way of court and 
legal fees, plus the effort for such litigation, may even be more costly than the money 
matter in question. This scenario gives the lender an opportunity to take advantage and 
impose an interest rate at his own will.  As of the moment, and with the suspension of 
the effectivity of the Usury Law, there is no law to criminally hold these persons or 
entities who engaged in usurious practices, making it easy for them to victimize the 
public, especially the poor, who were only forced by circumstances to “cling to the 
knife”. 
1 
 Medel v. CA, 359 Phil. 820 (1998). 
2 
 Rizal Commercial Banking Corporation v. Court of Appeals, 352 Phil. 101, 126 (1998) 
[Per J. Melo, Second Division]. 
3 
 G.R. No. 225433, August 28, 2019, Concurring and Dissenting Opinion, Leonen, 


The State shall treat the rich and poor equally, but today, people who are poor 
are systemically treated worse than the wealthy.  People without financial means are 
the common victims of these loan sharks, sending them into an inescapable cycle of 
financial hardship, making them poorer and trapping them in an endless cycle of 
poverty.  
 It is perhaps in light of these considerations that I strongly believe that there is 
a need to set a ceiling on what interest rate should be considered conscionable, without 
having the need to resort to courts for its determination, and to readily penalize those 
who will violate it. We must seriously address this current issue faced by ordinary 
Filipinos who are forced to seek temporary financing despite the exorbitant interest 
rates, in order to meet their daily needs.  
“Allowing money to produce more money-for instance, lending money at 
excessive interest rates as a way of increasing money-lays the foundation for a 
growing wealth disparity, since loans are usually extended by those who are richer 
(with capital) to those who are poorer (without capital). This does not serve the 
demands of social justice; that is, "the humanization of laws and the equalization of social 
and economic forces by the State so that justice in its rational and objectively secular conception may 
at least be approximated."4 
This Bill seeks to declare as iniquitous and unconscionable an interest rate of more than twice 
the prevailing legal rate of interest on a money debt and penalize those who will violate it. It is in 
accordance with the wisdom of the Supreme Court which held that “Thus, the maximum interest rate 
that will not cross the line of conscionability is "not more than twice the prevailing legal rate of 
interest." If the stipulated interest exceeds this standard, the creditor must show that the rate is 
necessary under current market conditions, or that the parties were on an equal footing when they 
stipulated on the interest rate.5 
Irene Gay F. Saulog 
Kalinga Party-list 
4 
 Calalang v. Williams, 70 Phil. 726, 734 (1940) [Per J. Laurel, First Division]. 
5 
 Philippine National Bank v. Court of Appeals, 308 Phil. 18, 24 (1994) [Per J. Puno, Second 
Division] citing Philippine National Bank v. Court of Appeals, 273 Phil. 789 (1991) [Per J. Griño-Aquino, First 
Division] 


Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
EIGHTEENTH CONGRESS 
Third Regular Session 
House Bill No. ____________ 
Introduced by: REPRESENTATIVE IRENE GAY F. SAULOG 
AN ACT 
PENALIZING PERSONS OR CORPORATIONS WHO IMPOSE INIQUITOUS 
OR UNCONSCIONABLE FINANCE CHARGE ON CREDIT 
TRANSACTIONS 
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 “Conscionable 
Interest Rate Act”. 
SEC. 2. Declaration of Policy. – The State shall protect and serve the demands 
of social justice by the humanization of laws and the equalization of social and 
economic forces by the State so that justice in its rational and objectively secular 
conception may at least be approximated. 
The rights of the parties to have the freedom to stipulate interest while ensuring 
that they have an equal footing during bargaining and that neither of the parties has a 
relatively greater bargaining power to command a higher or lower interest rate shall be 
the paramount consideration in the enactment of this Bill.   
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Towards this end, the State shall ensure that the finance charges on credit 
transactions are neither iniquitous nor unconscionable, without the parties having to 
undergo court proceedings and incur expenses for the determination on what interest 
rates on money debt are iniquitous or unconscionable. 
As such, the State shall establish a standardized rate ceiling on credit 
transactions imposing finance charge, as the basis in determining whether such finance 
charge is iniquitous or unconscionable, without prejudice to such rates as maybe 
prescribed by the Monetary Board of the BANGKO SENTRAL NG PILIPINAS or 
other laws for that purpose in accordance with the authority granted to it. 
SEC. 3. Scope. – This Act shall cover all credit transactions imposing a finance 
charge, whether regulated or not by the Monetary Board of the BANGKO SENTRAL 
NG PILIPINAS or other laws, except those transactions wherein the said Monetary 
Board or other laws has already prescribed a maximum interest rate for that purpose 
which shall not exceed twenty four percent (24%) per annum. 
SEC. 4. Definition of Terms. – As used in this Act. 
(a) Credit transactions refers to any loan, mortgage, deed of trust, advance, or 
discount; any credit card and credit card cash advancements; any conditional 
sales contract; any contract to sell, or sale or contract of sale of property or 
services, either for present or future delivery, under which part or all of the 
price is payable subsequent to the making of such sale or contract; any 
rental-purchase contract; any contract or arrangement for the hire, bailment, 
or leasing of property; any option, demand, lien, pledge, or other claim 
against, or for the delivery of, property or money; any purchase, or other 
acquisition of, or any credit upon the security of, any obligation of claim 
arising out of any of the foregoing; and any transaction or series of 
transactions having a similar purpose or effect. 
 
(b) Credit card refers to any card or other credit device intended for the purpose 
of obtaining money, property, or services on credit. 
 
(c) Credit card cash advancements refers to cash obtained from the credit card 
account in any manner availed by the cardholder. 
 
(d) Finance charge refers to interest, fees, service charges, discounts, and such 
other charges incident to the extension of credit. 
 
(e) Iniquitous or unconscionable finance charge refers to interest, fees, service 
charges, discounts, and such other charges incident to the extension of credit 
which is more than twice the prevailing legal rate of interest on loans or 


forbearance of any money good or credit as prescribed by Monetary Board 
of the BANGKO SENTRAL NG PILIPINAS.  
 
SEC. 5. Punishable Act. – No person or Corporation shall directly or indirectly 
impose an iniquitous or unconscionable finance charge from any credit transactions as 
defined in this Act unless the Monetary Board of the BANGKO SENTRAL NG 
PILIPINAS or other laws has already prescribed a maximum interest rate for that 
purpose which shall not exceed twenty four percent (24%) per annum. 
SEC. 6. Penalties. – 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 the amount equivalent to the 
principal obligation nor more than double the amount equivalent to the principal 
obligation, or to imprisonment for not less than thirty (30) days nor more than one 
year, or both, in the discretion of the court, and to return the entire sum received as 
interest from the party aggrieved, including all costs and expenses incurred in the 
prosecution of the offense, and in cases of nonpayment, to suffer subsidiary 
imprisonment at the rate of one day for each amount equivalent to the highest 
minimum wage rate prevailing in the Philippines at the time of the rendition of 
judgment of conviction by the trial court subject to the rules set forth under 
REPUBLIC ACT NO. 10159 (AN ACT AMENDING ARTICLE 39 OF ACT NO. 
3815, AS AMENDED, OTHERWISE KNOWN AS THE REVISED PENAL CODE): 
Provided, that in case of corporations, associations, societies, or companies the 
manager, administrator or gerent or the person who has charge of the management or 
administration of the business shall be criminally responsible for any violation of this 
Act.   
SEC. 7. Information Dissemination. – The Monetary Board of the BANGKO 
SENTRAL NG PILIPINAS, in coordination with Philippine Information Agency, 
Department of Finance, Department of Trade and Industry, Securities and Exchange 
Commission, and other departments/instrumentalities/agencies, including the private 
sector, which the Monetary Board may deem proper to coordinate, shall make known 
to the public by all means necessary, information regarding this Act and its 
implementation to the public.  
SEC. 8. Implementing Rules and Regulations. – Within ninety (90) days, the 
Monetary Board of the BANGKO SENTRAL NG PILIPINAS, after due consultation 
with Philippine Information Agency, Department of Finance, Department of Trade 
and Industry, Securities and Exchange Commission, and other 
departments/instrumentalities/agencies, including the private sector, which the 


Monetary Board may deem proper to consult, shall promulgate the rules and 
regulations to implement this Act. 
SEC. 9. Separability Clause. – If any provision or part of this Act is declared 
unconstitutional or invalid, the remaining parts or provisions not affected shall remain 
in full force and effect. 
SEC. 10. Repealing Clause. – Laws, decrees, letters of instructions, executive 
issuances, resolutions, orders, or parts thereof which are inconsistent with the 
provision of this Act are hereby repealed, modified, or amended accordingly. 
SEC. 11. Effectivity. – This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in a newspaper of general circulation.