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Republic of the Philippines | op
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Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3618

Introduced by Representative Giorgidi B. Aggabao

EXPLANATORY NOTE

The present law on usury, R.A. No, 2655, enacted during the American
occupation, is a dead statute. This law has been rendered moribund by P.D.s 116, 358,
and 1684, which empowered the Monetary Board of the Bangko Sentral Ng Pilipinas to
prescribe the interest rates on loans and forbearances over and above the prescribed rate
fixed in the original law. Unfortunately, the Monetary Board has not done so, opting
instead to the leave the interest rates to market forces, that is, to whatever the parties
may agree to stipulate. Consequently, many debtors especially those in the cusp of
emergencies are asked to pay interests at 10% per month, or a whopping 120% per
annum, owing to the cupidity of most creditors.

This bill primarily seeks to put a cap on interest rate by ensuring that the
allowable interest a lender may collect, shall be based exclusively on a benchmark
interest rate. As proposed, the interest rate is fixed at 3% above the 91-day treasury bill
rate (for secured loans) and 5% above the 91-day treasury bill rate (for unsecured loans).
Additionally, this bill seeks to cover interests on credit cards. By using a fixed
benchmark, the rate of interest is guaranteed to be competitive and attuned to the
obtaining economic realities,

It is hoped that this bill will help the small borrowers, primarily the farmers who
rely solely on credit for capital. It is also hoped, that this bill will prevent borrowers
being trapped in the quagmire of debt by making interest rates reasonable and humane.

In view of the foregoing, early passage of this bill is earnestly requested.

GIORGIDIB. BEasa0


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3618

Introduced by Representative Giorgidi B. Aggabao

AN ACT
PRESCRIBING THE RATES OF INTEREST UPON LOANS AND
FORBEARANCES BY AMENDING CERTAIN SECTIONS OF REPUBLIC ACT
NO. TWENTY SIX HUNDRED AND FIFTY FIVE, AS AMENDED,
OTHERWISE KNOWN AS THE USURY LAW

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

Section 1. Section 1 of Republic Act No. Twenty Six Hundred and Fifty Five
(R.A. 2655), as amended, is hereby amended to read as follows:

“Sec. 1, The rate of interest for the loan of forbearance on 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 as to such rate of interest shall be TWELVE (12 %)
percent per annum or such rate as may be prescribed by the monetary Board of
the BANGKO SENTRAL NG PILIPINAS for that purpose in accordance with
the authority herby granted: PROVIDED, THAT SAID MAXIMUM RATE
SHALL NOT BE MORE THAN THREE PERCENTAGE (3 %) POINTS ABOVE
THE NINETY ONE (91) DAY TREASURY BILL RATES WITHIN THE
QUARTER PRECEDING THE MONETARY BOARD’S IMPOSITION OF
SAID MAXIMUM RATE.”

SEC. 2. Section 2 of Republic Act No. Twenty Six Hundred Fifty Five (R.A. 2655),
as amended, is hereby amended to read as follows:

“Sec. 2. No person 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, at 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
ADVANCES OR RENEWAL THEREOF, where such loan or forbearance is
secured in whole or in part by a mortgage upon real estate the title to which is
duly 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 IT IS NOT BE MORE THAN THREE (3%) PERCENTAGE
POINTS ABOVE THE NINETY ONE (91) DAY TREASURY BILL RATES
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. 3, Section 3 of Republic Act No. Twenty Six Hundred Fifty Five (R.A. 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 or forbearance of money, goods, or
CHARGES ON credits, CREDIT CARDS AND OTHER CASH ADVANCE
ARRANGEMENTS, where such loans 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 THAT FIVE PERCENTAGE (5 %) POINTS ABOVE THE NINETY ONE
(91) DAY TREASURY BILL RATE WITHIN THE PRECEDING QUARTER
FROM THE TIME THE LOAN OR RENEWAL THEREOF IS GRANTED.”

SEC. 4, Section 4 of Republic Act No. Twenty Six Hundred Fifty Five (R.A. 2655),
as amended, is hereby amended to read as follows:

“Sec, 4, No pawnbroker or pawnbroker’s agent shalll directly or indirectly
stipulate, charge, demand, 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 that ONE THOUSAND PESOS (P1,000.00) or more but not
exceeding TWO THOUSAND FIVE HUNDRED (P 2,500.00); and FIFTEEN
percent (15%) per annum WHEN it is more that 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 NINETY ONE (91) DAY TREASURY BILL RATE
WITHIN THE PRECEDING QUARTER. A pawnbroker or a pawnbroker’s
agent shalll be considered such, for the benefits of this Republic Act, only if he be
duly licensed and has an establishment open to the public.

It shall LIKEWISE be unlawful for a pawnbroker’s agent to divide the pawn
offered by a person into two (2) or more fractions in order to collect a greater
interest than the permitted by this section.

It shall also be unlawful for a 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. 5, Section 5 of Republic Act No. Twenty Six Hundred Fifty Five (R.A. 2655),
as amended, is hereby amended to read as follows:

“Sec, 5. In computing the interest on any obligation, promissory note or
other instrument or contraption, 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 is judicially claimed, in which 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 NINETY ONE (91)
DAY TREASURY BILL RATE WITHIN THE PRECEDING QUARTER. No
Person or corporation shall require interest to be paid in advance for a period of
more than TWO (2) 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. 6. Section 7 of Republic Act No. Twenty Six Hundred Fifty Five (R.A. 2655),
as amended, is hereby amended to read as follows:

“Sec. 7. All covenants and stipulations contained in conveyances,
mortgages, bonds, bills, notes and other contracts or evidence of debts, and all
deposits of goods, or other 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
herein before allowed, shall be void: Provided, however, that no merely clerical
error in the computation of interest, made without intent to evade any of the


provisions of this Act, shall render THE STIPULATION OR AGREEMENT
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 purchase 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 provisions of this Act and said purchase.

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 costs and such attorney’s fees as may be allowed by the court.”

SEC. 7. Section 9-A of Republic Act No. Twenty Six Hundred Fifty Five (R.A.
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 NINETY ONE (91) DAY TREASURY BILL RATE
EVERY QUARTER FOR THE PUBLIC'S INFORMATION AND EASY
REFERENCE, AND promulgate such rules and regulations as may be necessary
to implement effectively the provisions of the Act.”

SEC. 8. Section 10 of Republic Act No. Twenty Six Hundred Fifty Five (R.A.
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
THOUSAND pesos (P100,000.00), nor more than TWO HUNDRED
THOUSAND pesos (P200,000.00), AND imprisonment for not less than one (1)
year nor more than six (6) years, and to return the entire sum received as interest
from the party aggrieved, and in the case of non-payment, to suffer subsidiary
imprisonment at the rate of one (1) day for every EIGHT pesos (P8.00); Provided,
That, in case of corporations, associations, societies, or companies, the manager,
administrator, or ‘gerente’ OR THE PERSON WHO HAS CHARGE OF THE
MANAGEMENT OR ADMINISTRATION OF THE BUSINESS, AND WHO


ARE DIRECTLY RESPONSIBLE FOR CAUSING INTEREST RATES ABOVE
THE LEVEL HEREIN PROVIDED TO BE CHARGED shall be criminally
responsible for any violation of this Republic Act.

SEC. 9. All laws, Acts, decrees, or parts thereof, inconsistent with the provisions
of this Act are hereby repealed and or modified accordingly.

SEC. 10. This Act shall take effect fifteen (15) day following its publication in the
Official Gazette or in at least two (2) newspapers of general circulation.

Approved,