ACT NO.

2655
ACT NO. 2655 - AN ACT FIXING RATES
OF 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 in
money 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$e per
centum per annum or the maximum rate prescribed by the Monetary Board
and in force at the time the loan or renewal thereof or forbearance is granted(
!ro$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
$alue for any loan or forbearance than two and one"half per centum per month
when the sum lent is less than one hundred pesos, two per centum per month
when the sum lent is one hundred pesos or more, but not exceeding fi$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$ide the
pawn offered by a person into two or more fractions in order to collect greater
interest than the permitted by this section.
%t shall also be unlawful for a pawnbroer or pawnbroer+s agent to re.uire
the pawner to pay an additional charge as insurance premium for the
safeeeping and conser$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$ailing
economic and social conditions.
Sec. *"b. %n the exercise of its authority to fix the maximum rate or rates of
interest under this -ct, the Monetary Board shall be guided by the following(
1. The existing economic conditions in the country and the general
re.uirements of the national economy,
&. The supply of and demand for credit,
). The rate of increase in the price le$els, and
*. Such other rele$ant criteria as the Monetary Board may adopt.
Sec. /. %n computing the interest on any obligation, promissory note or other
instrument or contract, compound interest shall not be reconed, except by
agreement( !ro$ided, That whene$er compound interest is agreed upon, the
effecti$e rate of interest charged by the creditor shall not exceed the e.ui$alent
of the maximum rate prescribed by the Monetary Board, or, in default thereof,
whene$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 re.uire 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 e.ui$alent of the maximum rate prescribed by the Monetary
Board.
Sec. 0. -ny person or corporation who, for any such loan or renewal thereof or
forbearance, shall ha$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$ided such interest, and commissions and premiums do not exceed the rates
fixed in this -ct.
Sec. 1. -ll co$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, shall
render 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 subse.uent 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
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 such
attorney+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$ing paid otherwise shall be entitled in
case action is brought within two years after such payment or deli$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 $iolation of the
pro$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$e
hundred pesos, or to imprisonment for not less than thirty days nor more than
one year, or both, in the discretion of the court, and to return the entire sum
recei$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 $iolation of this -ct.
Sec. 11. -ll -cts and parts of -cts inconsistent with the pro$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.