Advocates for Truth in Lending, Inc. vs. BSP, et. al.
G.R.
No. 192986 / January 15, 2013
REYES,
J.
FACTS:
Advocates for Truth in Lending, Inc. and its
President, Eduardo Olaguer claim that they are raising issues of transcendental
importance to the public and so they filed Petition for Certiorari under Rule
65 ROC seeking to declare that the Bangko Sentral ng Pilipinas Monetary Board
(BSP-MB), replacing the Central Bank Monetary Board (CB-MB) by virtue of R.A.
No. 7653, has no authority to continue enforcing Central Bank Circular No. 905,
issued by the CB-MB in 1982, which "suspended" the Usury Law of 1916
(Act No. 2655).
R.A. No. 265, which created the Central Bank
(CB) of the Philippines, empowered the CB-MB to, among others, set the maximum
interest rates which banks may charge for all types of loans and other credit
operations, within limits prescribed by the Usury Law.
In its Resolution No. 2224, the CB-MB issued
CB Circular No. 905, Series of 1982. Section 1 of the Circular, under its
General Provisions, removed the ceilings on interest rates on loans or
forbearance of any money, goods or credits.
On June 14, 1993, President Fidel V. Ramos
signed into law R.A. No. 7653 establishing the Bangko Sentral ng Pilipinas
(BSP) to replace the CB.
ISSUE/S:
1. Whether the CB-MB exceeded its authority when
it issued CB Circular No. 905, which removed all interest ceilings and thus
suspended Act No. 2655 as regards usurious interest rates. NO
2.
Whether under R.A. No. 7653, the BSP-MB may
continue to enforce CB Circular No. 905. YES
RULING:
1. The CB-MB merely
suspended the effectivity of the Usury Law when it issued CB Circular No. 905.
The power of the CB to effectively suspend
the Usury Law pursuant to P.D. No. 1684 has long been recognized and upheld in
many cases. As the Court explained in the landmark case of Medel v. CA, citing
several cases, CB Circular No. 905 "did not repeal nor in anyway amend the
Usury Law but simply suspended the latter’s effectivity;" that "a CB
Circular cannot repeal a law, [for] only a law can repeal another law;"
that "by virtue of CB Circular No. 905, the Usury Law has been rendered ineffective;"
and "Usury has been legally non-existent in our jurisdiction. Interest can
now be charged as lender and borrower may agree upon."
By lifting the interest ceiling, CB Circular
No. 905 merely upheld the parties’ freedom of contract to agree freely on the
rate of interest. It cited Article 1306 of the New Civil Code, under which the
contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
2. The
BSP-MB has authority to enforce CB Circular No. 905.
Section 1 of CB Circular No. 905 provides
that, "The rate of interest, including commissions, premiums, fees and
other charges, on a loan or forbearance of any money, goods, or credits,
regardless of maturity and whether secured or unsecured, that may be charged or
collected by any person, whether natural or juridical, shall not be subject
to any ceiling prescribed under or pursuant to the Usury Law, as
amended." It does not purport to suspend the Usury Law only as it applies
to banks, but to all lenders.
Petitioners contend that, granting that the
CB had power to "suspend" the Usury Law, the new BSP-MB did not
retain this power of its predecessor, in view of Section 135 of R.A. No. 7653,
which expressly repealed R.A. No. 265. The petitioners point out that R.A. No.
7653 did not reenact a provision similar to Section 109 of R.A. No. 265.
A closer perusal
shows that Section 109 of R.A. No. 265 covered only loans extended by banks, whereas
under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the
maximum rate or rates of interest for all loans or renewals thereof or the
forbearance of any money, goods or credits, including those for loans of low
priority such as consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions. It even authorizes the
BSP-MB to prescribe different maximum rate or rates for different types of
borrowings, including deposits and deposit substitutes, or loans of financial
intermediaries. Act No. 2655, an earlier law, is much broader in scope, whereas
R.A. No. 265, now R.A. No. 7653, merely supplemented it as it concerns loans by
banks and other financial institutions. Had R.A. No. 7653 been intended to
repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal
terms.
Further, the lifting of the ceilings for
interest rates does not authorize stipulations charging excessive,
unconscionable, and iniquitous interest. It is settled that nothing in CB
Circular No. 905 grants lenders a carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets. Stipulations authorizing iniquitous or
unconscionable interests have been invariably struck down for being contrary to
morals, if not against the law.
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