Monday, May 16, 2016

Usurious loans and Duterte’s campaign against Indians

Usury is immoral. But, technically speaking, it is not a crime. 

Usury Law is legally inexistent with the issuance of CB Circular 905 (c. 1980s).

Under the said CB Circular 905 interest can now be charged as the lender and the borrower may agree upon.

In the 1980s the Monetary Board, under Pres. Ferdinand Marcos, adopted a “floating interest rate” policy.

It continues to be the official policy/law on the matter up to now.

Nonetheless, the Supreme Court (SC), in a long line of cases, has ordered the reduction of unconscionable and iniquitous interest rates in contracts of loans and other forbearance of money even if the victim-debtor had agreed thereto.

The interest rates approved by the SC in the past varied from 1% to 3% per month.

It many cases the SC has rejected a 5% interest rate a month regardless of the consent of the debtor to the contract of loan.

(To read sample cases, search the SC website:

In 2013 the Monetary Board (MB) issued Resolution No. 796, dated May 16, 2013, stating that “IN THE ABSENCE OF EXPRESS STIPULATION BETWEEN THE PARTIES, the rate of interest in loan or forbearance of any money, goods or credits and the rate allowed in judgments shall be 6% per annum.” 

The said MB Resolution was later embodied in Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of2013, which took effect on July 1, 2013.

It is of common knowledge that Filipino-owned local financing companies, pawnshops, credit card companies, and lending companies impose an interest rate of 3% to 5% a month. 

Foreign and local banks charge their credit card holders 3% to 3.5% a month.

It is not a crime. 

As stated earlier, the official policy/law since the 1980s is “floating interest rate”.

A rate of 3% to 5% a month is immoral. 

It is exploitative.

It is a heavy burden for debtors, mostly laborers, peasants and fishermen, whose poverty forces them to borrow at unconscionable and iniquitous interest rates from their landlords, traders, buyers, suppliers and “suki”.

The heavy burden is masked and soothed by “many years of friendship” between the lenders and the debtors.

Many have lost their lands and other personal properties via “judicial and extrajudicial foreclosures and auctions sales” for incurring such loans.

Many have been exposed to the risk of “involuntary servitude” and “human trafficking” for incurring such loans.

Unless a special anti-usury law is adopted, lending funds at high “floating interest rate” would not be punishable as a malum prohibitum crime. 

Duterte targets the Indian 5-6 lenders.

He says he will talk to the Indian ambassador to advise his compatriots to cease from such business.

All aliens (not only the Indians), who are here on tourist visas or expired tourist visas and who engage in 5-6 lending business, whether registered or not, violate the terms and conditions of their tourist visas and the applicable Philippine immigration laws which prohibit temporary visitors from engaging in business here.

Duterte can have them arrested and deported at any time, if he wants to. 

He must follow the proper arrest and deportation procedures, though.

Moreover, he must respect the legal rights of the respondent Indians to procedural and substantive due process of law, to bail, to counsel, to remain silent, and other applicable constitutional rights.

The Bill of Rights applies also to aliens here. Not only to Filipinos.

Duterte must make good his promise to arrest and imprison immigration officers and agents who make illegal aliens as milking cows.

If the aliens (Indians) are here, however, on lawfully issued immigrant/resident visas or special retirement resident visas, or if they have been judicially naturalized here in accordance with our naturalization law, they have the legal right to engage in lawful business here to earn a living to support themselves and their families. 

Lending money at an interest rate of 3% to 5% a month on the part of the abovementioned resident or naturalized aliens (Indians) is a lawful business because of our “floating interest rate” policy, unless the said rate is subsequently reduced by the courts in a proper judicial proceeding for being unconscionable (which is civil in nature).

Duterte cannot have the resident aliens arrested and deported on the basis alone of engaging in such a lending business.

At the end of the day, Duterte must be consistent as a leader.

He must include in his anti-5-6 campaign all greedy Filipino lenders who similarly exploit their poor compatriots as the 5-6 Indian lenders do.

He must start with the feudal landlords and warlords in his own turf, Mindanao, where the poorest towns and provinces in the country are located.

Some of them are his friends, leaders and campaign funders in Mindanao.