QuestionsQuestions (PRESIDENTIAL DECREE NO. 858)
PD No. 858 amends Act No. 2655 (the Usury Law) to allow interest rate ceilings to be adjusted and, in certain cases, increased or suspended so that money markets do not divert funds from economically desirable areas.
PD No. 858 amended Section 1-a of Act No. 2655, as amended.
The Monetary Board is authorized to prescribe maximum rate or rates of interest for loans (including renewals) or forbearance of money, goods, or credits, and to change those rates whenever warranted by prevailing economic and social conditions.
Yes. The Monetary Board may prescribe higher maximum rates for loans of low priority such as consumer loans or renewals, and for loans made by pawnshops, finance companies, and similar institutions.
No. The rates prescribed for these institutions need not necessarily be uniform.
It authorizes the Monetary Board to prescribe different maximum rates for different types of borrowings, including deposits and deposit substitutes, or loans made by financial intermediaries.
It added Section 4-a. It allows the Monetary Board to eliminate, exempt from, or suspend the effectivity of interest rate ceilings on certain types of loans or renewals, or forbearances, whenever warranted by prevailing economic and social conditions.
Section 4-a is renumbered as Section 4-b.
Depending on the type of loan and the prevailing economic and social conditions, the Monetary Board may remove the ceiling, carve out an exemption, or temporarily stop the ceiling’s effectivity.
The decree cites prevailing economic and social conditions (and also frames the policy rationale as directing savings and capital to needed areas).
It notes that some transactions offer returns higher than usury-law ceilings, drawing money supply away from desirable investment areas to the detriment of national interest.
It explicitly mentions consumer loans and renewals, and loans made by pawnshops, finance companies, and other similar credit institutions.
Any acts and parts of acts inconsistent with the provisions of PD No. 858 are repealed.
It took effect immediately upon issuance on December 31, 1975.
A court would consider whether the Monetary Board has prescribed maximum interest rates for the specific loan type, and if not, whether ceilings were eliminated, exempted, or suspended under the Monetary Board authority granted by PD No. 858 (Section 4-b).
PD No. 858 states it is issued by the President by virtue of powers vested by the Constitution, and it expressly amends and supplements Act No. 2655.
It emphasizes that interest rates, together with other monetary and credit policy instruments, play a vital role in directing domestic savings and capital resources to the economic activities where they are needed most.