Amendment to Usury Law on Interest Rates

Presidential Decree No. 858 amends Act No. 2655, as amended, otherwise known as the “Usury Law.”
Presidential Decree No. 858 is issued under the President’s constitutional powers vested by the Constitution.

Presidential Decree No. 858 addresses transactions involving lending of funds that generate returns on investment higher than the Usury Law’s maximum ceilings.
Presidential Decree No. 858 declares that higher returns in the money market draw money supply away from desirable investments, to the detriment of national interest.
Presidential Decree No. 858 recognizes that the interest rate, together with other monetary and credit policy instruments, plays a vital role in directing domestic savings and capital resources to economic activities where needed most.

Section 1 amends Section 1-a of Act No. 2655 to authorize the Monetary Board to prescribe the maximum rate or rates of interest for:
- the loan or renewal thereof, or
- the forbearance of any money, goods or credits.
Section 1 authorizes the Monetary Board to change the maximum rate or rates whenever warranted by prevailing economic and social conditions.
Section 1 authorizes the Monetary Board to prescribe higher maximum rates for loans of low priority, including:
- consumer loans or renewals thereof, and
- loans made by pawnshops, finance companies, and other similar credit institutions.
Section 1 authorizes the Monetary Board to prescribe non-uniform rates for those institutions if warranted, and to prescribe different maximum rates for different types of borrowings, including:
- deposits and deposit substitutes, and
- loans of financial intermediaries.

Section 2 adds Section 4-a to Act No. 2655, granting the Monetary Board the power to eliminate, exempt from, or suspend the effectivity of interest rate ceilings.
Section 2 limits the power to cases whenever warranted by prevailing economic and social conditions.
Section 2 applies the power to certain types of loans or their renewals, as well as forbearances of money, goods, or credit.

Section 3 renumbers Section 4-a of the amended Act as Section 4-b.
Section 4 repeals all Acts and parts of Acts inconsistent with Presidential Decree No. 858.
Section 5 provides that Presidential Decree No. 858 takes effect immediately.