Sky shouldn’t be the limit: House panel seeks cap on credit card, loan interest rates

By Billy Begas

The House Committee on Banks and Financial Intermediaries has moved to put a cap on interest rates imposed by credit card and consumer loans companies.

The panel is deliberating on House Bill 7967 authored by Bataan Rep. Geraldine Roman.

Roman explained that the country used to have a Usury Law (Republic Act 2655) which capped the interest that can be imposed upon a loan and forbearance of money.

However, in March 1980, the Usury Law was amended by Presidential Decree 1684 giving the Monetary Board the authority to prescribe rates of interest.

Later, the Monetary Board issued Circular 905-1982 removing the ceilings on interest rates. Consequently, many debtors especially those in the cusp of emergencies pay interests at 5-10% a month.

Deputy Speaker Bernadette Herrera said it is high time to put an end to the predatory and abusive lending practices “which have been among the greatest threats to Filipino families working to achieve financial security”.

Under the measure, the maximum interest rate for credit card charges and other cash advance arrangements will be pegged at 12% 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 the 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.”

Herrera said she will talk to Speaker Lord Allan Velasco and Majority Leader Ferdinand Martin Romualdez to put the bill as part of the priority measures of the 18th Congress.

“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 said.

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 P8 per day.

Source: Latest Politics News Today (Politics.com.ph)