AMENDING FURTHER CERTAIN SECTIONS OF ACT NUMBERED TWO THOUSAND SIX HUNDRED FIFTY-FIVE, AS AMENDED, OTHERWISE KNOWN AS "THE USURY LAW"

• Number: Presidential Decree No. 116
• Sections: 13

Preamble

WHEREAS, the interest rate, together with other monetary

and credit policy instruments, performs a vital role in mobilizing

domestic savings and attracting capital resources into preferred areas

of investment;

WHEREAS, the monetary authorities have recognized the need

to amend the present Usury Law to allow for more flexible interest rate

ceiling that would be more responsive to the requirements of changing

economic conditions; and

WHEREAS, the availability of adequate capital resources is,

among other factors, a decisive element in the achievement of the

declared objective of accelerating the growth of the national economy;

NOW, THEREFORE I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution

as Commander-in-Chief of the Armed Forces of the Philippines, and

pursuant to Proclamation No. 1081, dated September 21, 1972, and General

Order No. 1, dated September 22, 1972, as amended, and in order to

effect the desired changes and reforms in the social, economic, and

political structure of our society, do hereby order and decree the

amendment of Act No. 2655, as amended, as follows:

Section 1

SECTION 1. Section one of Act Numbered Two Thousand six

hundred fifty-five is hereby amended to read as follows:

“SEC. 1. The rate of interest for the loan or forbearance

of any money, goods, or credits and the rate allowed in judgments, in

the absence of express contract as to such rate of interest, shall be

six per centum 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.”

Section 2

SEC. 2. The same Act is hereby amended by adding the

following section immediately after section one thereof, which reads as

follows:

“SEC. 1-a. The Monetary Board is hereby authorized to

prescribed the maximum rate or rates of interest for the loan or renewal

thereof or the forbearance of any money, goods or credits, and to

change such rate or rates whenever warranted by prevailing economic and

social conditions: Provided, That such changes shall not be

made oftener than once every twelve months.

"In the exercise of the authority herein granted, the Monetary

Board may prescribe higher maximum rates for consumer loans or renewals

thereof as well as such loans made by pawnshops, finance companies and

other similar credit institutions although the rates prescribed for

these institutions need not necessarily be uniform.

Section 3

SEC. 3. Section two of the same Act is hereby amended to

read as follows:

"SEC. 2. No person or corporation shall directly or

indirectly take or receive 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, for the loan or

renewal thereof or forbearance of money, goods, or credits, 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, than

twelve par centum 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: 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 may likewise apply

to loans secured by other types of security as may be specified by the

Monetary Board."

Section 4

SEC. 4. Section three 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 credits, where such loan or

forbearance is not secured as provided in Section two hereof, than

fourteen per centum per annum or the maximum rate or rates

prescribed by the Monetary Board and in force at the time the loan or

forbearance is granted."

Section 5

SEC. 5. Section four 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 per month when the sum lent is less

than one hundred pesos; two per centum per month when the sum

lent is one hundred pesos or more, but not exceeding five hundred pesos;

and fourteen per centum 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. A pawnbroker or 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 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."

Section 6

SEC. 6. The same Act is hereby amended by adding the

following section immediately after Section four thereof, which reads as

follows:

"SEC. 4-a. In the exercise of its authority to fix the

maximum rate or rates of interest under this Act, the Monetary Board

shall be guided by the following:

"1. The existing economic conditions in the country and the

general requirements of the national economy;

"2. The supply of and demand for credit;

"3. The rate of increase in the price levels; and

"4. Such other relevant criteria as the Monetary Board may

adopt."

Section 7

SEC. 7. Section five 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 per annum interest or such rate as may be prescribed by the

Monetary Board. No person or corporation shall require interest to be

paid in advance for a period of more than one year: 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."

Section 8

SEC. 8. Section seven of the same Act is hereby amended to

read as follows:

"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 or

greater sum or value for the loan or renewal or forbearance of money,

goods, or credits than is hereinbefore 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 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, shall prevail

notwithstanding subsequent changes in the maximum rates that may be made

by the Monetary Board: 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."

Section 9

SEC. 9. The same Act is hereby amended by adding the

following section immediately after Section nine thereof, which reads as

follows:

"SEC. 9-a. The Monetary Board shall promulgate such

rules and regulations as may be necessary to implement effectively the

provisions of this Act."

Section 10

SEC. 10. Section ten of the same Act 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 fifty pesos nor more than Five hundred 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 the case of

non-payment, to suffer subsidiary imprisonment at the rate of one day

for every two 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 shall be criminally responsible for any violation of

this Act."

Section 11

SEC. 11. All acts and parts of acts inconsistent with the

provisions of this Decree are hereby repealed.

Section 12

SEC. 12. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year

of Our Lord, nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Executive Secretary