Interest Limits and Restrictions for Pawnbrokers
- Pawnbrokers and their agents may charge up to 2.5% per month for loans under 100 pesos.
- For loans from 100 pesos up to 500 pesos, interest is limited to 2% per month.
- Loans exceeding 500 pesos are subject to a 14% annual interest rate.
- Only duly licensed pawnbrokers with public establishments are covered.
- Unlawful practices include dividing pawned goods to increase interest and requiring additional insurance charges for safekeeping.
Computation and Restrictions on Interest
- Compound interest is prohibited unless expressly agreed upon.
- If no agreement exists, judicial claims for debt will bear simple interest at 6% per annum.
- Interest may not be required to be paid more than one year in advance.
Remedies for Payment of Excess Interest and Recovery
- Borrowers who paid excessive interest or charges may recover the excess with costs and attorney’s fees.
- Claims for recovery must be filed within two years from payment.
- Creditors are not obliged to return interest or commissions collected in advance for a period not exceeding one year if debts are settled early, provided rates do not exceed the law’s limits.
Effect of Usurious Terms on Contracts and Transactions
- Any contract or stipulation reserving, securing, or charging interest or other charges above legal limits is void.
- Clerical errors in computation without intent to evade the law do not void the contract.
- An innocent purchaser of negotiable mercantile paper for valuable consideration before maturity is protected if there was no intent to evade the usury provisions.
- The original maker of a note retains the right to recover excessive interest paid from the original holder, including costs and attorney’s fees.
Application and Effectivity of the Act
- The Act takes effect upon approval.
- It does not apply to pending transactions or obligations contracted before approval, except for renewals made after the Act’s effectivity date.