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

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 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.”

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.

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.”

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.”

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.”

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.”

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.”

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.”

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.”

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.”

SEC. 11. All acts and parts of acts inconsistent with the
provisions of this Decree are hereby repealed.

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.