2.

According to Article 1229 the penalty may be reduced by the court when both parties agreed
to a penalty that is iniquitous and unconscionable. The Yus filed a case against BPI for recovery
of alleged excessive penalty charges; BPI charged 36% per annum which was 3 times the fixed
rate imposed by the court in cases of State Investment House, attorney’s fees and foreclosure
expenses; the bank did not provide evidence that would justify their claim. The RTC reduced the
rate to 12% per annum, however, the Yus contended that the penalty charges must be voided and
the attorney’s fees must be reduced to 1% for the reason that BPI violated R.A. 3765 or known
as the Truth in Lending Act.

The promissory note signed by the Yus was comprised of a penal clause and considered as a
valid contract, hence, even if BPI failed to disclose the penalty charges they did not violate the
R.A. 3765. Section 4 of the Truth in Lending Act states that the creditor may dispense for a penal
clause provided that the debtor is well informed about the terms and conditions prior to entering
the credit agreement. In spite of this, by reason of iniquitous and unreasonable penalty charges,
the court have the authority to equitably lessen the penalty. Hence, the court denied the petition,
imposing a 12% penalty charge per annum and reduced the attorney’s fee charged by the BPI.