Citing unconscionable interest rates collected on loans, Bangon Pilipinas lone senatorial candidate Eddie Villanueva on Friday pushed for the revival of a 1916 law that provides ceilings on interest charges on loans.
Villanueva said if elected to the Senate, he will file a bill to put back into effect the Anti-Usury Law, which was amended by Presidential Decree No. 116, fixed the maximum interest rates on loans at 12% per annum.
He said such a measure will restore protection to Filipinos who, wittingly or unwittingly, take out loans despite high interest rates – worsening the borrowers’ financial problems.
“The most vulnerable in this ongoing scheme are our sagigilids. Take the case of our overseas Filipino workers who had to borrow money from 5-6 so they can pay for the placement fees and other related charges so they can work abroad to fend for their families,” Villanueva said. “In the first few months of them working abroad, they have to pay off those high-interest loans.”
“And then there are our farmers, fishermen and poor families who are forced to live in debt because they cannot earn enough to live a decent life. If we are to help them break out from the cycle of poverty, we need to have a law that will protect them from these abusive lenders,” Villanueva said.
“We need to have a law that will save Filipinos from becoming willing or unwilling victims of 5-6 and other usurious forms of loans.”
He noted that the Anti-Usury Law will cover institutional lenders such as banks and credit unions, peer-to-peer lenders, and credit card companies and prevents them from charging unconscionable interest rates on loans given to borrowers.
Villanueva said the general features of the proposed law include fixing a legal ceiling limit on how much a can lender impose as interest rate. That limit can either be based on inflation or the 91-day Treasury bill, whichever is lower.
In February 1916, Congress enacted Republic Act No. 2655 entitled “An Act Fixing Rates Of Interest Upon Loans And Declaring The Effect Of Receiving Or Taking Usurious Rates And For Other Purposes” setting interest rates at “six per centum per annum.”
The law was amended in January 1973 by Presidential Decree No. 116, adjusting the maximum rate of loan interests to 12% per annum.
In December 1982, however, the then-Central Bank of the Philippines issued Circular No. 905 that effectively suspended the law by removing the ceiling on interest rates.
According to Villanueva, many lenders have since exploited the suspension of limits on interest rates, charging up to 42% per annum in compounded interest.
“Without government intervention on the current sky-high interest rates being collected by lending firms and individuals, Filipino consumers – but most especially the poor – will sink deeper into the debt trap in their desire to put food on the table and a roof over their heads,” Villanueva said.
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