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PRESIDENTIAL DECREE NO. 116
PRESIDENTIAL DECREE NO. 116 -
AMENDING FURTHER CERTAIN Sections OF ACT NUMBERED TWO THOUSAND SIX
HUNDRED FIFTY-FIVE, AS AMENDED, OTHERWISE KNOWN AS "THE USURY LAW"
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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;chanroblesvirtualawlibrary
WHEREAS, the monetary authorities have recognized the need to amend the
present Usury Law to allow for more flexible interest rate ceilings
that would be more responsive to the requirements of changing economic
conditions;chanroblesvirtualawlibrary
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;chanroblesvirtualawlibrary
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:cralaw:red
Section 1. Section one of Act Numbered Two thousand
six hundred fifty-five is hereby amended to read as follows:cralaw:red
"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 fix 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. The same Act is hereby amended by adding
the following section immediately after the section one thereof, which
reads as follows:cralaw:red
"Sec. 1-a. The Monetary Board is hereby authorized to
prescribe the maximum rate or rate of interest for the loan or renewal
thereof or the forbearance of any money, goods or credits, and to
chance 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. chanroblesvirtualawlibrary
"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. Section two of the same Act is hereby
amended to read as follows:cralaw:red
"Sec. 2. No person or corporation shall directly or
indirectly take or receive in money or other property, real or
personal, or chooses 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 per centum per annum on 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." chanroblesvirtualawlibrary
Section 4. Section three of the same Act is hereby
amended to read as follows:cralaw:red
"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 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. Section four of the same Act is hereby
amended to read as follows:cralaw:red
"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. The same Act is hereby amended by adding
the following section immediately after Section four thereof, which
reads as follows: chanroblesvirtualawlibrary
"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:cralaw:red
"1. The existing economic conditions in the country
and the general requirements of the national economy;chanroblesvirtualawlibrary
"2. The supply of and demand for credit;chanroblesvirtualawlibrary
"3. The rate of increase in the price levels; and
"4. Such other relevant criteria as the Monetary
Board may adopt."
Section 7. Section five of the same Act is hereby
amended to read as follows:cralaw:red
"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 not 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. Section seven of the same Act is hereby
amended to read as follows:cralaw:red
"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 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 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." chanroblesvirtualawlibrary
Section 9. The same Act is hereby amended by adding
the following section immediately after Section nine thereof, which
reads as follows:cralaw:red
"Sec. 9-a. The Monetary Board shall promulgate such
rules and regulations as may be necessary to implement effectively the
provisions of this Act." chanroblesvirtualawlibrary
Section 10. Section ten of the same Act is hereby
amended to read as follows:cralaw:red
"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 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. All Acts and parts of Acts inconsistent
with the provisions of this Decree are hereby repealed.
Section 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.
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