Solon seeks interest-rate cap on consumer loans

A deputy speaker is calling for the immediate passage of a bill seeking to put an interest rate cap on credit card and consumer loans offered by banks and other financial institutions.

House Deputy Speaker Bernadette Herrera-Dy issued the call as she backed the passage of House Bill (HB) 7967 filed by Bataan Rep. Geraldine B. Roman. The bill proposes amendments to the Usury Law that will cap interest rates for credit cards and otherwise set a prescribed range of fixed rates for various forms of lending.

The bill is pending with the House Committee on Banks and Financial Intermediaries.

“It is high time that we put an end to predatory and abusive lending practices, which have been among the greatest threats to Filipino families working to achieve financial security,” Herrera said.

The bill sets the maximum interest rate for credit card charges and other cash advance arrangements at 12 percent annually, or any such rate prescribed by the Monetary Board of the Bangko Sentral ng Pilipinas, subject to some constraints.

The limitation on the Monetary Board-set rate on loan, forbearance agreements and credit card charges is “not more than three-percentage points higher than the rate of 91-day treasury bills in the quarter preceding the monetary board’s imposition of the said maximum rate.”

Under the bill, those who will violate any of its provisions could face a fine of up to P5 million or imprisonment of not more than 12 years, or both.

On top of this, the violator shall return the entire sum received as interest from aggrieved party plus all costs and expenses incurred in the prosecution of the offense.

In case of non-payment, the violator shall suffer subsidiary imprisonment at the rate of one day for every P8.

Moreover, the Bagong Henerasyon Party-list representative said setting a cap on credit card and loan interest rates has never been more imperative with quarantines forcing a lot of businesses to close down and pushing up the country’s unemployment rate.

“It is unfortunate that even during the pandemic, these banks and lending companies abuse the humble worker and entrepreneur, obligating them to pay high interest rates and penalties for late payments,” Herrera added.

According to Herrera, she will ask the leadership to include the bill in its priorities to ensure the swift passage of the measure.

She said she will talk to Speaker Lord Allan Jay Q. Velasco and Majority Leader Ferdinand Martin G. Romualdez about the possibility of including HB 7967 in the list of priority measures under the 18th Congress.

Roman, meanwhile, said the proposal is not unprecedented.

“The Philippines used to have a Usury Law [Republic Act 2655], which capped the interest that can be imposed upon a loan and forbearance of money,” Roman said. “However, on March 17, 1980, the Usury Law was amended by Presidential Decree 1684, giving the Monetary Board the authority to prescribe rates of interest.”

Roman explained that pursuant to such authority and in response to the lobby from banks and lending institutions, the Monetary Board issued Central Bank Circular 905-1982, removing the ceilings on interest rates by declaring that such rates are no longer subject to any ceiling prescribed under or pursuant to the Usury Law.

“Therefore, at present, the debtor and creditor may enter into a contract providing for any amount of interest. Consequently, many debtors especially those in the cusp of emergencies pay interests at 5 to 10 percent a month,” the lawmaker added.