PREDATORY lending or the practice of charging unreasonably high rates of interest on indebtedness is as old as civilization. The Bible makes several references to usury.
We used to have a Usury Law. Commonwealth Act No. 2655 was enacted by Congress one hundred years ago to fix rates of interest upon loans at six percent per year, subject to adjustment by the Monetary Board of the Central Bank of the Philippines.
The Monetary Board did more than just adjust the rates; they removed the ceiling. As a result, the rates soared sky high.
Now comes President Duterte ordering the arrest of those who are engaged in the nefarious practice. Although, he singled out the Bombays, his order should be understood to include every lender who bleeds his borrowers dry.
Everybody knows the Bombays, those Indian immigrants who found financial success in lending money to small-time entrepreneurs under a scheme in which the borrower pays six pesos for every five pesos borrowed every month.
But the Bombays do not have a monopoly of usury anymore. Everyone is into it, including lending institutions that are duly licensed and whose charges could come up to 50% per annum, if you include penalty and other charges.
There is a Supreme Court decision that prohibits the imposition of usurious rates but how many collection cases eventually reach the High Court? More often than not, a defaulting borrower, who is sued, surrenders to this immoral arrangement. Worse, he has to pay for the attorney’s fees also.
I had a friend who had suffered an even worse fate. One morning, when she discovered that she could no longer withdraw her salary from the ATM machine. When she verified with the bank, she was told that her account has been levied upon by virtue of a court order executing a judgment for collection.
That was when she remembered that she acted as co-maker for a loan obtained by a former officemate. Apparently, the borrower defaulted on the loan and the lending company sued both of them. She received notices from the court but ignored them because her officemate assured her that she would take care of everything. Then, she vanished.
She, who signed the promissory note for a loan in which she did not get a single centavo from the proceeds because she accommodated a friend, ended up paying interest at two percent per month, penalties and surcharges, also at two percent monthly plus attorney’s fees. For more than three months, she worked without even seeing her salary.
Duterte’s justice secretary, Vitaliano Aguirre, said they will arrest the Bombay usurers even without a warrant. Please include those who conduct business from air-conditioned offices, Mr. Secretary.
And please make it soon.