Everybody knows about “5-6” and similar lending schemes. Everybody also knows that, ironically, those who are in financial trouble are forced to accept ridiculously high interest rates – which, in many (almost all?) instances, leads to more trouble (financial or otherwise).
Indeed, with the suspension of the Usury Law and the removal of interest ceiling, the parties are free to stipulate the interest rates to be imposed on monetary obligations. However, while the Supreme Court recognizes the right of the parties to enter into contracts, this rule is not absolute.
In a recent case, the SC again dealt with the validity of interest agreed by the parties, stating that:
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 and unconscionable, the Court must consider the circumstances of each case. What may be iniquitous and unconscionable in one case, may be just in another.
In that case, the SC reduced the interest rate from 18% to 12% per annum, noting, among others, that the amount involved has ballooned to an outrageous amount four times the principal debt.
Indeed, there is no hard and fast rule to determne the reasonableness of interest rates. Stipulated interest rates of 21%, 23% and 24% per annum had been sustained in certain cases.
On the other hand, there are plenty of cases when the SC equitably reduced the stipulated interest rates; for instance, from 18% to 10% per annum. The SC also voided the stipulated interest of 5.5% per month (or 66% per annum), for being “excessive, iniquitous, unconscionable and exorbitant, hence, contrary to morals (”contra bonos mores”), if not against the law”. The same is true with cases involving 36% per annum, 6% per month (or 72% per annum), and 10% and 8% per month. In these instances, the SC imposed the legal interest of 12%.
Just to be clear, “legal interest” doesn’t mean that anything beyond 12% is “illegal”. It simply means that in a loan or forbearance of money, the interest due should be that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum.
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Sources: Trade & Investment Development Corporation of the Philippines vs. Roblett Industrial Construction Corporation (G.R. No. 139290, 9 May 2006); Development Bank of the Philippines vs. Court of Appeal; Garcia vs. Court of Appeals; Medel vs. Court of Appeals; Security Bank and Trust Company vs. RTC Makati; Spouses Solangon vs. Salazar; Cuaton vs. Salud; Ruiz vs. CA; Eastern Shipping vs. Court of Appeals, G.R. No. 97412 July 12, 1994. Also posted here.
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my nakilala po ako financier sa same building ng condo ng inuupahan namin sa malate manila she educated person business woman english speaking but pilipina so i believed her and at time i dont have any idea that interest have a limit and sinabi nya po sa akin 25% per week and 1% per day umutang po kami ng 100k nung may 16 2012 and may 22 2012 ngbayad po kami ng 25k for interest pagdating po ng 29 hinulugan po namin paunti unti
29-5k 30-5k 31-3k 06\1- 16k 2-3k ung process na po yan pumunta po cia sa shop namin para kunin lahat ng benta namin. nung june 3 po ngwala po cia sa loob ng shop namin at pinagmumura kami dahil tinago daw po namin ung asawa ko at sa pagsagot ko daw sa knya ng hindi ko alm kung asan asawa ko pagtapos nya magwala at pagmumurahin kami saka damay lahat pati staff na shock po ako sa ginawa nya kz it my first time ko po nakakita ng ganun sinabihan nya po ako ng makapal ang mukha no body speak at the time or no body move ng ngwawala cia hinayan lng po namin cia then bumaba na po ang asawa ko from building nagulat po cia sa ngyari kinausap po cia ng maayus na need nya ng time para sa full payment pinapirma nya po ung asawa ko di gaano nakakaintidi ng tagalog at english na kukunin lahat ng gamit from shop kapg hind nakabayad sa jun 4 ng 20k
ng pablotter po ako sa baranggay bout sa ginawa nya sa pag lalait samin at pang alipusta jun 5 po ng formal blotter po ako ng sa brggy at after 2day makakarecieve na cia ng summoned bout my complaint. ng gabi po un ng karuon ng meeting ung asawa ko at ako nasa house lang po nilabas nya po ung mga gamit namin sa shop ng wala po kami at employee lng ang nasa shop tama po bha ang ginawa nya, ang nagbuhat po ay ang maintenance po ng building damay po bha ung mga maintenance help me po
ano po bng ung minimun interest rate and maximum rate n pd iapply s money lending na approved by the BSP?
maam..good afternoon im interested sana humiram sa inyo..i know that there are people that are bashing you because of your business..im not one of them..i know what im doing..could you please help me heres my number 09175462668..pls maam
good afternoon po. gusto ko po sanang humingi ng payo sa inyo. tungkol po ito sa kapatid ko na umutang ng 20k. nun july. ang usapan po nila ay magiging 24k ang babayaran niya pagka-1 buwan. na-delay po ng pagbayad ang kapatid ko at sinabi ng taong yun na madadagdagan ng 1k per week ang interest. lumalabas po na 5% per week ang tubo nila. kaya kung kukuwentahin ay 20% per month or 240% per annum. hindi po ba sobrang laki nung interst na yun? wala po silang pinirmahang kontrata. willing naman po magbayad ang kapatid ko, nakapagbigay na po ng 5k ang kapatid ko pero nakikiusap po na kung puwede ay i-stop na yun tubo dahil sa katapusan ng buwan na ito lalabas na 30k na ang babayaran niya dahil 2 1/2 months na yun. kaya kung di pa cy makakabayad ng husto ay lalaki pa ng lalaki yun utang nya. sinasabi pa po na sindikato raw po yun boss ng taong yun at bk kung anong magawa sa kanila pag di binayaran. salamat po at sana po ay mabigyan nyo ako ng kaukulang sagot.
Legal po ba ang 3%monthly interest na pinapatong ng lending sa loan ko?at wla slang official reciept n binibgay..scratch paper lang ung rcibo nla…is this correct?