Question: Is it legal to charge 180% per annum interest, and what legal actions can be taken against harassment by creditors?
In the Philippines, the issue of high-interest rates and the conduct of creditors during debt collection are governed by a combination of civil and criminal laws.
Interest Rates and Usury Laws
Under the Usury Law, as amended by Central Bank Circular No. 905, interest rates are generally deregulated, meaning that the parties to a loan agreement are free to stipulate their own interest rates. However, this does not mean that any interest rate is automatically enforceable. Courts may strike down interest rates that are deemed to be "unconscionable" or "excessive." An interest rate of 180% per annum, or 15% per month, could be considered excessive, especially if it results in the debtor being unable to meet their obligations. Courts have, in some cases, reduced such high rates to a more reasonable level, depending on the circumstances.
Harassment and Collection Practices
Harassment by creditors, especially when it involves threats, defamation, or harm to a debtor's family, is not only unethical but also illegal under Philippine law. The Revised Penal Code provides sanctions against unjust vexation, threats, and defamation, which can be applied in cases where a creditor oversteps the bounds of legal collection practices. Additionally, Republic Act No. 10175 or the Cybercrime Prevention Act of 2012 includes provisions that may apply if the harassment occurs through social media.
Moreover, the Financial Consumer Protection Act (Republic Act No. 11765) also provides that financial institutions must treat their clients fairly and reasonably, with the law penalizing unfair debt collection practices.
Legal Remedies
Debtors who feel harassed by creditors have several legal remedies. They can file a complaint with the appropriate authorities, such as the National Bureau of Investigation (NBI) or the police, if the actions of the creditor constitute a criminal offense. They may also file a civil case for damages arising from defamation or emotional distress.
In addition, if the interest rate is deemed unconscionable, the debtor can file a petition in court to have the rate reduced to a more equitable level. Courts have the discretion to modify interest rates that are found to be excessive.
Conclusion
While parties are free to agree on interest rates, there are limits to what can be considered fair and enforceable under the law. Debtors facing harassment and excessive interest rates have legal options available to protect their rights and should consider seeking legal advice to explore these remedies.