THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
Introduced by Senator JINGGOY EJERCITO ESTRADA 
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. 1 16, 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, to wit: 
GENERAL PROVISIONS 
SEC. I. 
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 whose 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 misfortunes 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 on loans. 
ESTMDA 
Senator 


THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
) 
SENATE 
S.B. NO. 1087 
Introduced by Senator JJNGGOY EJERCITO ESTRADA 
AN ACT 
FIXING THE RATES OF INTEREST UPON LOANS AND FORBEARANCES BY 
AMENDING CERTAIN SECTIONS OF ACT NO. TWENTY SIX HUNDRED AND 
FIFTY-FIVE (2655), AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled 
SECTION 1. Section I 
of Act Numbered Twenty-Six and 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 I-a of Act No. Twenty-Six Hundred and Fifty-Five (Act 
SEC. 3. Section 2 of Act: No. Twenty Six Hundred and Fifty- five (Act. No. 
No. 2655), as amended, is hereby repealed. 
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 
(1 5%) per annum or such rate as may be agreed upon by the parties: Provided, 
That the maximum rate that the parties my 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. Twenty-Six Hundred and Fifty-five (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 or 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 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 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 form the loan or renewal thereof is granted." 
SEC. 5. Section 4 of Act No. Twenty-six Hundred and fifty-five (Act No. 2655), as 
"SEC. 4. No pawnbroker or pawnbroker's agent shall directly or indirectly 
stipulate, charge, and, 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 
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 the an the amount last mentioned; or as may be agreed upon the parties: 
Provided, That the maximum rate that the parties: Provided, That the maximum 
rate that the parties may charge or agree to charge shall not be more than three 
amended, is hereby amended to read as follows: 


percentage (3%) points above the average rate of 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 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. Twenty-Six Hundred and Fifty-Five (Act No. 
2655), its amended, is hereby repealed. 
SEC. 7. Section 4-b of Act No. Twenty Six Hundred and Fifty-five (Act No. 2655), 
. 
as amended, is hereby re-numbered as Section 4-A. 
SEC. 8. Section 5 of Act No. Twenty-Six Hundred and Fifty- Five (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 or 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 $hall 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 (I 
2%) 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. Twenty-Six Hundred and Fifty- five (Act No. 2655), 
as amended, is hereby amended to read as follows: 
“SEC. 7. All covenants and stipulation contained in mortgages, bonds, 


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 he 
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: 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 said purchaser to 
evade the provision of this Act and said purchase was not a part of original 
usurious the 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.lO. Section 9-a of Act No. Twenty-Six Hundred and Fifty-Five (Act No. 
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 quarter (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 implement the effectively necessary to provisions of 'this 
Act. I' 
2655), as amended, is hereby repealed to read as follows: 
SEC. 11. Section 10 of Act No. Twenty-Six Hundred and Fifty-Five {Act No. 
2655, as amended, is hereby amended to read as follows: 
"SEC. IO. 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 (PI OO.OO), 
nor more than Two thousand pesos (P2, OOO.OO), or imprisonment for not less 
than thirty (30) days nor more than one (I) 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 (P8.00): Provided, That case of corporations, 
associations, societies, or companies, the manager, administrator or "gerente" or 
the persons who has charge of the management or administration of the 
business shall be criminally to 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 newspapers of 
general circulation, whichever is earlier. 
Approved,