Time for this admin to restore anti-usury law

Just recently, President-elect Rodrigo Duterte has been in the news venting critical swipes against the “5-6” money lenders, particularly the “Bombays” in our midst and times.  These money-lenders have been so-called because of the manner by which they lend: A person borrows P5 over a period of one month, and he must repay the lender P6, which includes the one peso interest.

Indeed, Duterte has an axe to grind! The P1-interest on a P5 loan is 20 percent per month or 240 percent per year—alongside the 12 percent maximum allowable rate under the original Usury Law of 1916.

That law, as amended in 1982, has since removed the 12-percent ceiling. The parties to a loan are now generally free to stipulate the interest rates to be imposed.

Maybe—just maybe—the removal of the ceiling was not altogether ill-advised. For one thing, the binding effect of the interest rates agreed upon between creditor and debtor is not absolute. As a matter of fact, in a record case, the Supreme Court dealt with the validity of the interest agreed by the party, stating: “Stipulated interest rates are illegal if they are unconscionable and the Court is allowed to temper interest rates when necessary. In exercising this vested power to determine what is iniquitous or unconscionable, the Court must consider the circumstances of each case. What is iniquitous or unconscionable in one case may not necessarily be so in another.”

That is fine and very well said! But let’s get real. Who, among the victims of the “5-6” lenders, has ever gone or can afford to go to court? Meanwhile, I have always been astonished by the whale of a difference between the banks’ borrowing and lending rates. For example, the average interest rate per year on savings deposits is way below 1 percent, while the interest rate on credit card transactions is way beyond 40 percent.

And so, letter writer Bernardo V. Peralta from Cebu City was right when he said, “Attention, honorable senators and representatives: There is an urgent need to restore the anti-usury law…” (“Time to restore anti-usury law,” Inquirer.net, 2/20/14).

That was more than two years ago; the call has now fallen on deaf ears.  My hopes run high that the new president will look into this in due course.

—RUDY L. CORONEL, [email protected]