THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
1 
First Regular Session 
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JijIj 413 p 3 :pJ 
OF THE PHILIPPINES 
S E N A T  
s. No 
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Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
Lending Institutions have become increasingly important due to its 
immediate viability to small borrowers who do not have ready access to credit 
facilities of banks and other lending institutions. These money lending shops, 
however, have become a bane to the small borrowers due to the former's 
excessive and unco 
able interest rates on approved loans. 
hat there should be a national policy of setting a ceiling 
rates beyond which shall be considered as usurious 
w on usury is Act No. 2655, as amended, enacted by 
on February 24, 1916. However, this has been 
Presidential Decrees 116, 358 and 1684, which 
oard of the Bangko Sentral ng Pilipinas to fix and 
of interest for loans and forbearances in accordance 
g the prevailing economic and social needs of the 
times. 
s to impose a ceiling on interest rates to address the 
ers who, in their financial difficulties, agree to pay 
ontracted by them, thereby sinking them further into 
easure also addresses the need to re-impose 
order to provide more protection to the country's 
small borrowers. 
approval of this bill is earnestly requested. 
/ 
SERGIO OSMENA 111 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
) 
OF THE PHILIPPINES 
SENATE 
S. No. 
1
:
 
Introduced by Senator S. R. OsmeAa 111 
*I, 
AN ACT 
FIXING THE RATES OF INTEREST UPON LOANS AND FOREBEARANCES BY 
AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NO. TWENTY SIX 
HUNDRED AND FIFTY-FIVE, AS AMENDED, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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SECTION 1. Section I 
of Republic Act No. 2655, as amended, is hereby 
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further amended to read as follows: 
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“SECTION 1.The rate of interest for the loan or forbearance of any 
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money goods, or credits OR CHARGES ON CREDIT CARDS AND 
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OTHER CASH ADVANCE ARRANGEMENTS, and the rate allowed in 
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judgments, in the absence of express contract as to such rate of interest, 
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shall be [ six per centum ] TWELVE (12%) PERCENT per annum or such 
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rate as may be prescribed by the Monetary Board of the [ Central Bank of 
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the Philippines ] BANGKO SENTRAL NG PILIPINAS 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 2 of the same Act is hereby amended to read as 
follows: 
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“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 choses in action, a higher rate of interest or greater sum or 
value, including commissions, premiums, fines and penalties, CHARGES 
AND OTHER SURCHARGES, for the loan or renewal thereof or 
forbearance of money, goods, or credits, OR CASH ADVANCES OR 
RENEWAL THEREOF, where such loan or renewal 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 [ twelve per 
centum ] FIFTEEN PERCENT (15%) per annum or [ the maximum rate 
prescribed by the Monetary Board and in force at the time the loan or 
renewal thereof or forbearance is granted ] AS MAY BE AGREED UPON 
BY THE PARTIES MAY CHARGE OR AGREE TO CHARGE SHALLNOT 
BE MORE THAN THREE (3%) PERCENTAGE POINTS ABOVE THE 
AVERAGE INTEREST RATE OF NINETY (90) DAYS GOVERNMENT 
OR TREASURY BILLS WITHIN THE PRECEDING QURTER: Provided, 
That the rate of interest under this section or the maximum rate of interest 
that may be [ prescribed by the Monetary Board under this section ] 
AGREED UPOD 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 the same Act 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 
loan or forbearance is not secured as 
ARRANGEMENTS , where such 
provided in Section two hereof, 
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than [ fourteen per centum ] SIXTEEN percent (16%) per annum [ or the 
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maximum rate or rates prescribed by the Monetary Board and in force at ] 
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 
PRESEDING QUARTER FROM the time the loan or forbearance OR 
RENEWAL THEREOF is granted.” 
SEC. 4. Section 4 of the same Act is hereby amended to read as 
follows: 
“Sec. 4. 
No pawnbroker or pawnbroker’s agent shall directly or 
indirectly stipulate, charge, demand, take or receive any higher rate or 
greater sum or value for any loan or forbearance than [ two and one-half 
per centum ] THREE PERCENT per month when the sum lent is less 
than [ one ] EIGHT hundred pesos (P800.00) [; two per centum per 
month when the sum lent is one hundred pesos or more, but not 
exceeding five hundred pesos ] OR MORE BUT NOT EXCEEDING TWO 
THOUSAND FIVE HUNDRED PESO§ (P2,SOO.OOO); and [ fourteen per 
centum per annum ] FIFTEEN PERCENT (15%) PER ANNUM when it is 
more than the amount last mentioned; or [ the maximum rate or rates 
prescribed by the Monetary Board and in force at the time the loan or 
forbearance is granted ] 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 PRECENTAGE (3%) POINTS ABOVE THE AVERAGE RATE 
OF INTEREST OF NINETY (90) DAYS GOVERNMENT OR TREASURY 
BILLS WITHIN THE PRECEDING QUARTER. A pawnbroker or 
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pawnbroker's agent shall be considered such, for the benefits of this Act, 
only if he be duly licensed and has an establishment open to the public. 
"It shall ALSO be unlawful for a pawnbroker or pawnbroker's agent 
to divide the pawn offered by a person into two or more fractions in order 
to collect greater interest than that permitted by this section." 
"It shall also be unlawful for a pawnbroker or pawnbroker's agent 
to require the pawner to pay an additional charge as insurance premium 
for the safekeeping and conservation of the article pawned." 
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SEC.5. Section 5 
of the same Act is hereby amended to read as 
follows: 
"SEC. 5. 
In computing the interest on any obligation, promissory note 
or other instrument or 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, or, in default thereof, whenever the debt is judicially 
claimed, in which last case it shall draw [ six per centum ] TWELVE 
(12%) PERCENT per annum interest or such rate as may be prescribed 
by the Monetary Board WHICH RATE SHALL NOT BE MORE THAN 
THREE (3%) PERCENT 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 [ one 
year] 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 rate [ prescribed by the 
Monetary Board ] ALLOWED BY THIS ACT.'' 
SEC. 6. Section 7 
1 of the same Act is hereby amended to read as 
follows: 
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“SEC. 7. 
All covenants and stipulations contained in conveyances, 
mortgages, bonds, bills, notes and 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 interest or greater sum or 
value for the loan or renewal THEREOF or forbearance of money, goods, 
or credits than is hereinabove 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 [ a contract ] 
THE STIPULATION OR COVENANT PERTAINING TO THE RATE OF 
INTEREST void: Provided, further, That [ parties to a loan agreement, the 
proceeds of which may be availed of partially or fully at some future time, 
may stipulate that ] the rate of interest agreed upon at the time the loan 
agreement is entered into, which rate shall not exceed the maximum 
allowed [ by law ] HEREIN, shall prevail notwithstanding subsequent 
changes in the maximum rates that may be made by [ the Monetary 
Board ] LAW, UNLESS THE PARTIES 0 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 
provisions of this Act and said purchase was not a part of the 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 costs and such attorney’s fees as may 
be allowed by the court.” 
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SEC. 7. Section 9-A of the same Act is hereby am 
ed to read as 
follows: 
“Sec. 9-A. 
THROUGH PUBLICATION IN TWO (2) NEWSPAP 
CIRCULATION, THE AVERAGE RATE OF INTERE 
DAYS GOVERNMENT OR TREASURY BILLS EVERY QUARTER FOR 
THE PUBLIC’S INFORMATION AND 
EASY RE ERENCE AND 
promulgate such rules and regulations as may b 
necessary to 
implement effectively the provisions of this Act.” 
SEC. 8. 
The Monetary Board shall MAKE KNOW 
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Section 10 of the same Act is hereby amended to read as 
follows: 
“Sec. I O .  
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 
[ fifty ] ONE HUNDRED pesos (PlOO.00) nor more than [ five hundred ] 
TWO THOUSAND pesos, or to imprisonment for not less than thirty 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, and in 
case of non-payment, to suffer subsidiary imprisonment at the rate of one 
day for every [ two ] EIGHT pesos: 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.” 
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circulation whichever comes earlier. 
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Approved, 
SEC. 9. Repealing Clause. - All laws, decrees, executive orders, rules 
and regulations, or parts hereof inconsistent with the provision of this Act are 
hereby repealed, amended or modified accordingly. 
SEC. I O .  Effectivity. -- This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in at least two (2) newspapers of general 
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