act no. 2655 usury law

7/13/2019 Act No. 2655 Usury Law

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ACT NO. 2655

ACT NO. 2655 - AN ACT FIXING RATESOF INTEREST UPON LOANS AND

DECLARING THE EFFECT OF

RECEIVING OR TAKING USURIOUS

RATES AND FOR OTHER PURPOSES

Section 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 Ban of the

!hilippines for that purpose in accordance with the authority hereby granted.

Sec. 1"a. The Monetary Board is hereby authori#ed to prescribe 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 whene$er

warranted by pre$ailing economic and social conditions.

%n the exercise of the authority herein granted, the Monetary Board may

prescribe higher maximum rates for loans of low priority, such as 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. The Monetary Board is

also authori#ed to prescribe different maximum rate or rates for different

types of borrowings, including deposits and deposit substitutes, or loans of

financial intermediaries.

Sec. &. 'o person or corporation shall directly or indirectly tae or recei$e inmoney or other property, real or personal, or choses in action, a higher rate of

interest or greater sum or $alue, 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 con$eying such real estate or an interest therein, than twel$e per

centum per annum or the maximum rate prescribed by the Monetary Board


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and in force at the time the loan or renewal thereof or forbearance is granted(

!ro$ided, 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

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

by the Monetary Board.

Sec. ). 'o person or corporation shall directly or indirectly demand, tae,

recei$e or agree to charge in money or other property, real or personal, a

higher rate or greater sum or $alue for the loan or forbearance of money,

goods, or credits where such loan or forbearance is not secured as pro$ided 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.

Sec. *. 'o pawnbroer or pawnbroer+s agent shall directly or indirectly

stipulate, charge, demand, tae or recei$e any higher rate or greater sum or

$alue for any loan or forbearance than two and one"half per centum per monthwhen 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 fi$e

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. -

pawnbroer or pawnbroer+s agent shall be considered such, for the benefits of

this -ct, only if he be duly licensed and has an establishment open to the

public.

%t shall be unlawful for a pawnbroer or pawnbroer+s agent to di$ide the

pawn offered by a person into two or more fractions in order to collect greaterinterest than the permitted by this section.

%t shall also be unlawful for a pawnbroer or pawnbroer+s agent to reuire

the pawner to pay an additional charge as insurance premium for the

safeeeping and conser$ation of the article pawned.

Sec. *"a. The Monetary Board may eliminate, exempt from, or suspend the

effecti$ity of, interest rate ceilings on certain types of loans or renewals thereof

or forbearances of money, goods, or credit, whene$er warranted by pre$ailing

economic and social conditions.

Sec. *"b. %n the exercise of its authority to fix the maximum rate or rates of

interest under this -ct, the Monetary Board shall be guided by the following(

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

reuirements of the national economy

&. The supply of and demand for credit


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). The rate of increase in the price le$els and

*. Such other rele$ant criteria as the Monetary Board may adopt.

Sec. /. %n computing the interest on any obligation, promissory note or otherinstrument or contract, compound interest shall not be reconed, except by

agreement( !ro$ided, That whene$er compound interest is agreed upon, the

effecti$e rate of interest charged by the creditor shall not exceed the eui$alent

of the maximum rate prescribed by the Monetary Board, or, in default thereof,

whene$er 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. 'o person or corporation shall reuire interest to be paid in ad$ance

for a period of more than one year( !ro$ided, howe$er, That whene$er interest

is paid in ad$ance, the effecti$e rate of interest charged by the creditor shall

not exceed the eui$alent of the maximum rate prescribed by the Monetary

Board.

Sec. 0. -ny person or corporation who, for any such loan or renewal thereof or

forbearance, shall ha$e paid or deli$ered a higher rate or greater sum or $alue

than is hereinbefore allowed to be taen or recei$ed, may reco$er the whole

interest, commissions, premiums penalties and surcharges paid or deli$ered

with costs and attorneys+ fees in such sum as may be allowed by the court in an

action against the person or corporation who too or recei$ed them if such

action is brought within two years after such payment or deli$ery( !ro$ided,

howe$er, That the creditor shall not be obliged to return the interest,

commissions and premiums for a period of not more than one year collected by

him in ad$ance when the debtor shall ha$e paid the obligation before it is due,pro$ided such interest, and commissions and premiums do not exceed the rates

fixed in this -ct.

Sec. . -ll co$enants and stipulations contained in con$eyances, mortgages,

bonds, bills, notes, and other contracts or e$idences of debts, and all deposits of

goods or other things, whereupon or whereby there shall be stipulated,

charged, demanded, reser$ed, secured, taen, or recei$ed, directly or

indirectly, a higher rate or greater sum or $alue for the loan or renewal or

forbearance of money, goods, or credits than is hereinbefore allowed, shall be

$oid( !ro$ided, howe$er, That no merely clerical error in the computation of

interest, made without intent to e$ade any of the pro$isions of this -ct, shallrender a contract $oid( !ro$ided, further, That parties to a loan agreement, the

proceeds of which may be a$ailed 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

pre$ail notwithstanding subseuent changes in the maximum rates that may be

made by the Monetary Board( -nd !ro$ided, finally, That nothing herein

contained shall be construed to pre$ent the purchase by an innocent purchaser


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of a negotiable mercantile paper, usurious or otherwise, for $aluable

consideration before maturity, when there has been no intention on the part of

said purchaser to e$ade the pro$isions of this -ct and said purchase was not a

part of the original usurious transaction. %n any case, howe$er, the maer of

said note shall ha$e the right to reco$er from said original holder the whole

interest paid by him thereon and, in case of litigation, also the costs and suchattorney+s fees as may be allowed by the court.

Sec. 2. -ll loans under which payment is to be made in agricultural products or

seed or in any other ind of commodities shall also be null and $oid unless they

pro$ide that such products or seed or other commodities shall 0e appraised at

the time when the obligation falls due at the current local maret price(

!ro$ided, That unless otherwise stated in a document written in a language or

dialect intelligible to the debtor and subscribed in the presence of not less than

two witnesses, any contract ad$ancing money to be repaid later in agricultural

products or seed or any other ind of commodities shall be understood to be a

loan, and any person or corporation ha$ing paid otherwise shall be entitled incase action is brought within two years after such payment or deli$ery to

reco$er all the products or seed deli$ered as interest, or the $alue thereof,

together with the costs and attorney+s fees in such sum as may be allowed by

the court. 'othing contained in this section shall be construed to pre$ent the

lender from taing interest for the money lent, pro$ided such interest be not in

excess of the rates herein fixed.

Sec. 3. The person or corporation sued shall file its answer in writing under

oath to any complaint brought or filed against said person or corporation

before a competent court to reco$er the money or other personal or real

property, seeds or agricultural products, charged or recei$ed in $iolation of thepro$isions of this -ct. The lac of taing an oath to an answer to a complaint

will mean the admission of the facts contained in the latter.

Sec. 3"a. The Monetary Board shall promulgate such rules and regulations as

may be necessary to implement effecti$ely the pro$isions of this -ct.

Sec. 14. 5ithout prejudice to the proper ci$il action $iolation of this -ct and

the implementing rules and regulations promulgated by the Monetary Board

shall be subject to criminal prosecution and the guilty person shall, upon

con$iction, be sentenced to a fine of not less than fifty pesos nor more than fi$e

hundred pesos, or to imprisonment for not less than thirty days nor more thanone year, or both, in the discretion of the court, and to return the entire sum

recei$ed as interest from the party aggrie$ed, and in the case of non"payment,

to suffer subsidiary imprisonment at the rate of one day for e$ery two pesos(

!ro$ided, That in case of corporations, associations, societies, or companies the

manager, administrator or gerent or the person who has charge of the

management or administration of the business shall be criminally responsible

for any $iolation of this -ct.


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Sec. 11. -ll -cts and parts of -cts inconsistent with the pro$isions of this -ct

are hereby repealed.

Sec. 1&. This -ct shall tae effect on the first day of May, nineteen hundred and

sixteen.

ENACTED, February 24,1916.

act no. 2655 usury law

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