Case Facts
Advocates Advocates for Truth in Lending, Inc."
for Truth in (AFTIL) is a non-profit, non-stock
Lending corporation organized to engage in pro
Act, et al. bono concerns and activities relating to
vs. Bangko money lending issues. It was
Sentral incorporated on July 9, 2010, and a
Monetary month later, it filed this petition, joined by
Board its founder and president, Eduardo B.
Olaguer, suing as a taxpayer and a
citizen. They 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 BSP 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) Ruling
1.    Whether the 1. No. B-MB merely suspended the effectivity of the Usury Law
CB-MB when it issued CB Circular No. 905.
exceeded its
authority when it In Medel v. CA, it was said that the circular did not repeal nor
issued CB amend the Usury Law but simply suspended its effectivity; that a
Circular No. 905, Circular cannot repeal a low; that by virtue of CB the Usury Law
which removed has been rendered ineffective; that the Usury has been legally
all interest non-existent in our jurisdiction and interest can now be charged
ceilings and thus as lender and borrow may agree upon.
suspended Act
No. 2655 as Circular upheld the parties’ freedom of contract to agree freely on
regards usurious the rate of interest citing Art. 1306 under which the contracting
interest rates. parties may establish such stipulations, clauses terms and
conditions as they may deem convenient provided, they are not
2.      Whether contrary to law, morals, good customs, public order or public
under R.A. No. policy.
7653, the BSP-
MB may continue
to enforce CB
Circular No. 905. 2. Yes. BSP-MB has authority to enforce CB Circular No. 905.
RA 265 covered only banks while Section 1-a of the Usury Law,
empowers the Monetary Board, BSP for that matter, to prescribe
the maximum rate or rates of interest for all loans or renewals
thereof or the forbearance of any money, good or credits …
The Usury Law is broader in scope than RA 265, now RA 7653,
the later merely supplemented the former as it provided
regulation for loans by banks and other financial institutions. RA
7653 was not unequivocally repealed by RA 765.
CB Circular 905 is essentially based on Section 1-a of the Usury
Law and the Usury Law being broader in scope than the law that
created the Central Bank was not deemed repealed when the law
replacing CB with the Bangko Sentral was enacted despite the
non-reenactment in the BSP Law of a provision in the CB Law
which the petitioners purports to be the basis of Circular 905.
Magulo ba? Hahaha. Basta the present set up is: The power of
the BSP Monetary Board to determine interest rates emanates
from the Usury Law [which was further specified by Circular 905].

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.