Question & AnswerQ&A (Commonwealth Act No. 399)
The main purpose of Commonwealth Act No. 399 is to prohibit building and loan associations from taking or receiving, directly or indirectly, a higher rate of interest or greater sum including commissions, premiums, fines, or penalties for loans, renewals, forbearance of money, goods, or credits, or dues on shares than twelve percent per annum.
Sections Two and Three of Act Numbered 2655, commonly known as the Usury Law, are amended by Commonwealth Act No. 399.
Building and loan associations can charge a maximum interest rate of twelve percent (12%) per annum including all premiums, fines, and penalties.
No person or corporation shall take or receive a rate of interest higher than twelve percent (12%) per annum on loans secured in whole or in part by a mortgage upon real estate with duly registered title.
Loans or forbearance not secured as provided in Section 2 can carry a maximum interest rate of fourteen percent (14%) per annum.
The aggregate amount of the outstanding indebtedness of any building and loan association shall not at any time exceed fifty percent (50%) of the capital stock of all classes actually paid in.
No director or officer may borrow funds from the association except upon pledging shares of the association with a withdrawal value exceeding the amount borrowed. They cannot become guarantors, endorsers, sureties, or obligors for money borrowed unless secured similarly. Violations are punishable by imprisonment or fines.
They may be punished by imprisonment not exceeding five years, a fine between one thousand pesos and five thousand pesos, or both, at the discretion of the court.
No, the Act does not apply to contracts or transactions existing and in force at the time of its approval.
Section one hundred and seventy-eight of Act Numbered 1459, as amended, was repealed by Section 4 of Commonwealth Act No. 399.