Republic of the Philippines HOUSE OF REPRESENTATIVES Quezon City FIFTEENTH CON RESS Fi!st Re"ul#!

Session HOUSE $I%% No& '()* +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +Int!o,uce, by Rep& TE--. A& CASI/O E0P%ANATOR. NOTE This bill seeks to set a ceiling on interest rates charged by lending institutions for loans or any forbearance of money, goods or credit and to prescribe penalties for violation thereof. Republic Act (RA) No. 2 !!, other"ise kno"n as the #Usury Law, "as enacted in $%$ . &t "as amended by 'residential (ecree No. $$ , "hich provides, among others, that the legal rate of interest for the loan or forbearance of any money, goods or credits, "here such loan or rene"al or forbearance is secured in "hole or in part by a mortgage upon real estate the title to "hich is duly registered, in the absence of e)press contract as to such rate of interest, shall be $2* per annum. Any amount of interest paid or stipulated to be paid in e)cess of that fi)ed by la" is considered usurious, therefore, unla"ful. &n (ecember $%+2, ho"ever, then ,entral -ank of the 'hilippines, no" renamed Bangko Sentral ng Pilipinas, issued ,ircular No. %.!, /eries of $%+2 (0+ Off. Gaz. 011 ) effectively suspending RA 2 !! by removing the ceiling on interest rates. &n the case of Liam Law vs. Olympic Saw ill (2.R. 341.00$, 5ay 2+, $%+6), the /upreme ,ourt held that the 7sury 3a" is legally ine)istent, hence, higher interest can be charged as lender and borro"er may agree upon the rate of interest. Thus, "ith the suspension of the 7sury 3a" and the removal of interest ceilings, banks and other lending institutions are free to impose higher interest rates that "ould cause the amount of debt to balloon to an outrageous amount more than three times the principal debt. 8n average, lending institutions charge 1.0!* or even $.* interest rate per month "hich are unconscionable, oppressive and pre9udicial to the economic interest of the public. To stop this nefarious practice, this bill proposes that an interest rate of one percent ($*) per month or t"elve percent ($2 *) per annum be charged on all loans or any forbearance of money, goods or credit, such rate being deemed to be appropriate and e:uitable as enunciated in the recent case of acalinao vs. Bank of P!ilippine "slan#s (G.$. %o. &'()*+, Septem,er &', -++*.. &n that case, the /upreme ,ourt held that interest rates of three percent (1*) per month and higher are ini:uitous, unconscionable and e)orbitant and therefore void. The ,ourt ruled, in part, that an interest rate of one percent ($*) per month or t"elve percent ($2*) per annum is more appropriate and e:uitable. ;opefully, by setting the said ceiling on interest rates, the people "ho, out of desperation agree to pay e)orbitant interest to avail a loan, "ill be helped and protected. &t "ill

encourage and help small investors and entrepreneurs to apply for loans and "ill help level the playing field bet"een big and small investors. &t "ill also discourage and punish unscrupulous individuals "ho take advantage of the misfortune of others. &n vie" of the foregoing, immediate approval of this bill is earnestly re:uested. /pprove#,

TE--. A& CASI/O $#y#n 1un# P#!ty2list

Republic of the Philippines HOUSE OF REPRESENTATIVES Quezon City FIFTEENTH CON RESS Fi!st Re"ul#! Session HOUSE $I%% No& '()* +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +Int!o,uce, by Rep& TE--. A& CASI/O AN ACT SETTIN A CEI%IN ON INTEREST RATES CHAR E- $. %EN-IN INSTITUTIONS FOR %OANS OR AN. FOR$EARANCE OF 1ONE.3 OO-S OR CRE-IT AN- PRESCRI$IN PENA%TIES FOR VIO%ATION THEREOF Be it enacte# ,y t!e Senate an# 0ouse of $epresentatives in 1ongress assem,le#2 SECTION )& Short Title. < This Act shall be kno"n as the #"nterest $ates $egulation /ct.= SECTION 4& Declaration of Policy. < &t is the policy of the /tate to protect, promote and regulate the economic interest of the people. To"ard this end, this Act seeks to set a reasonable ceiling on interest rates charged by lending institutions on loans or forbearance of any money, goods or credit. SECTION 5& Ceiling on Interest Rates on Business Transactions. < All lending institutions shall charge an interest rate of not more than one percent ($*) per month or t"elve percent ($2*) per annum on loans or any forbearance of money, goods or credit. >or purposes of this Act, #len#ing institutions= shall include, but not limited to, banks, credit card companies, pa"nshops, savings and loan associations, credit unions, cooperatives or private individuals. SECTION '& Penalties. < Any person "ho shall violate /ection 1 of this Act shall, upon conviction, be punished by imprisonment of not less than three (1) months but not more than si) ( ) months or a fine of not less than Ten thousand pesos ($.,......) but not more than >ifty thousand pesos (!.,......), or both such imprisonment and fine, at the discretion of the court. &n case of a partnership, association, corporation or any 9uridical person, the penalty shall be imposed upon the president, treasurer or any other officer or person responsible for the violation. &n addition, the license to operate the business establishment shall be suspended for one ($) year for the first offense and cancelled for the second offense.

&f the offender is an alien, he shall, after service of sentence, be deported immediately "ithout further proceedings. SECTION 6& Implementing Rules and Regulations. < The Bangko Sentral ng Pilipinas shall, "ithin si)ty ( .) days from the effectivity of this Act, issue rules and regulations as may be necessary for the effective implementation of this Act. SECTION 7& Repealing Clause. < All la"s, decrees, orders, rules and regulations, and other issuances or parts thereof inconsistent "ith this Act are hereby repealed or modified accordingly. SECTION *& Effectivity. < This Act shall take effect fifteen ($!) days after its publication in the Official Gazette or in t"o (2) national ne"spapers of general circulation. /pprove#,