Is 15% Weekly Interest Legal?

Predatory Lending and Usury Laws in the Philippines

Short answer: A 15% weekly interest charge is not automatically illegal because statutory interest ceilings have long been suspended. But Philippine courts routinely strike down shockingly high rates as “unconscionable” or “iniquitous,” reduce them to the legal rate (generally 6% per year), and void abusive penalties. Lenders may also face regulatory and civil liabilities for predatory practices—even if the raw rate is not capped by statute.

Why 15% per week is extraordinary (the math)

Simple interest (no compounding): 15% × 52 weeks ≈ 780% per year; ≈ 65% per month.
Effective rate (compounded weekly): $(1 + 0.15)^{52} − 1$ ≈ 143,213% per year; monthly equivalent ≈ 83% per month.

Even on a ₱10,000 loan:

4 weeks simple: ₱10,000 × 0.15 × 4 = ₱6,000 interest.
4 weeks compounded: ₱10,000 × (1.15⁴ − 1) ≈ ₱7,490 interest. These magnitudes are exactly the kind of outcomes courts call unconscionable.

The legal framework—what actually governs lending rates

1) The Usury Law still exists, but ceilings are suspended

The Usury Law (Act No. 2655) historically set caps.
Since the early 1980s, Monetary Board issuances suspended interest ceilings to liberalize credit markets.
Practical effect: No fixed statutory maximum interest rate for ordinary loans.

Important: Suspension of caps ≠ free pass for any rate. Courts police fairness under the Civil Code and jurisprudence.

2) Freedom of contract vs. limits of fairness

Civil Code Article 1306: parties may set terms they want.
But courts invalidate or reduce stipulations that are illegal or against morals, public policy, or good customs (see Arts. 19–21 on abuse of rights and human relations).

3) Interest must be in writing

Civil Code Article 1956: No interest is due unless expressly stipulated in writing (promissory note, loan contract, disclosure statement, etc.).
- If the lender cannot produce a signed writing clearly stating the rate, no contractual interest may be collected (though the principal remains due, and legal interest may apply from default).

4) Courts can and do cut down excessive rates

The Supreme Court has repeatedly voided or reduced rates such as 3–6% per month (36–72% per year) as unconscionable, despite the suspension of usury ceilings.
Typical remedy: Strike down the stipulated rate and impose the legal rate instead (historically 12% p.a.; now generally 6% p.a. on loans/forbearance following the Court’s 2013 guidance).
Courts also reduce penalty charges (Civil Code Art. 1229) when they are excessive or serve as disguised interest.

5) Legal interest and when it applies

For loans or forbearance of money, if the stipulated rate is voided or absent, courts generally apply 6% per annum from default or demand (judicial or valid extrajudicial), and 6% per annum on judgments going forward.
Compounding (“interest on interest”) is not allowed unless clearly stipulated, and even then may be refused if unconscionable. Unpaid interest earns legal interest from judicial demand (Civil Code Art. 2212).

Regulatory landscape beyond the Civil Code

A) Banks, pawnshops, financing & lending companies

Banks & pawnshops are overseen by the Bangko Sentral ng Pilipinas (BSP).
Financing and lending companies are primarily regulated by the Securities and Exchange Commission (SEC) under:
- Lending Company Regulation Act of 2007 (RA 9474)
- Financing Company Act (RA 8556)
Operating without a license can lead to closure, fines, and criminal liability.

B) Truth-in-lending & disclosure

Truth in Lending Act (RA 3765) and related rules require lenders to disclose the full finance charge (interest, service/processing fees, other charges) and effective interest rate—so borrowers can compare apples to apples.
Courts and regulators will treat withheld service fees and mandatory add-ons as part of the true interest cost.

C) Financial Consumer Protection Act of 2022 (RA 11765)

Empowers the BSP, SEC, and IC to police unfair, deceptive, abusive acts and practices (UDAAP), including debt-shaming, harassment, misrepresentation, and abusive collection.
Agencies can order restitution, impose administrative sanctions, and shut down abusive providers—especially in online lending.

D) Special caps do exist in narrow areas

Example: credit cards have a separate BSP cap on finance charges, expressed as a monthly ceiling.
But: These caps apply only to credit card products, not to every loan. A 15% weekly rate on a non-card loan is not protected by the credit card cap and will be tested under unconscionability and consumer protection rules instead.

How Philippine courts analyze “predatory” terms

Courts look at the totality of circumstances, including:

Magnitude of the rate (e.g., 15% weekly is off-the-charts).
Clarity and form of the stipulation (is it in writing? is it hidden behind jargon?).
Bargaining power and necessitous circumstances of the borrower.
Stacked charges: “processing/service fees,” collected upfront; “penalties,” “collection fees,” and rollover structures that mimic compounding.
Collection behavior (harassment, public shaming, doxxing, abusive calls)—which can trigger tort liability (Civil Code Arts. 19–21) and regulatory sanctions.
Good faith and reasonableness of the lender’s practices.

Common judicial outcomes in predatory-rate cases:

Interest clause voided for unconscionability.
Penalties cut down substantially (Art. 1229).
Only principal + legal interest (6% p.a. from default/demand).
Attorney’s fees and other add-ons denied if oppressive.
Overpayments may be refunded as undue payments (quasi-contract / unjust enrichment).

Practical guidance

For borrowers facing 15% per week

Collect documents: contracts, promissory notes, receipts, screenshots, chat threads, call logs.
Check enforceability:
- Is the interest in writing and clear?
- Do “fees” effectively inflate the rate?
- Are there rollovers or forced renewals that create de facto compounding?
Compute the effective rate: include all fees and the net cash actually received.
Document harassment: recordings (if lawful), screenshots, witness statements.
Regulatory complaints (choose the right venue):
- Banks/pawnshops → BSP Consumer Assistance
- Lending/financing companies & online lenders → SEC
- Cooperatives → Cooperative Development Authority (CDA)
- Data privacy abuses (contact scraping, shaming) → National Privacy Commission (NPC)
- Criminal harassment/threats → PNP/NBI
Civil remedies:
- Small Claims for eligible amounts (streamlined; no need to prove complex damages).
- Regular civil action to annul or reform the interest/penalty stipulations, claim damages and refunds.
Negotiation tip: Put a polite, dated demand in writing to stop the clock on disputes and set the basis for legal interest if it escalates.

For lenders (compliance checklist)

Get licensed (SEC/BSP, as applicable).
Use clear, written agreements; disclose Annual Percentage Rate (APR)/effective interest.
Avoid weekly compounding and stacked fees that spike the effective rate.
Keep penalties reasonable and proportionate; separate default interest from penalties, and cap both.
Adopt non-abusive collection policies; no debt-shaming.
Maintain record-keeping and audit trails for disclosures and consents (especially in apps).

Frequently asked questions

Is 15% weekly interest “usurious” under Philippine law? Not in the classic, statutory-cap sense—because interest ceilings are suspended. But courts treat such a rate as presumptively unconscionable and typically reduce it drastically.

If the interest is voided, do I still owe anything? Yes, the principal remains due. Courts usually impose legal interest (about 6% p.a.) from default or demand, and may allow reasonable penalties/fees if justified and not oppressive.

What if the contract says “interest will compound weekly”? Courts scrutinize compounding and may refuse it if the overall burden is iniquitous—even if stated. Unpaid interest earns legal interest from judicial demand by law; automatic compounding by contract is not guaranteed to be enforced.

The lender withheld large “service fees”—is that allowed? Hidden or front-loaded charges are typically treated as part of the finance charge when assessing effective interest and unconscionability.

Is there any hard cap I can rely on? Only in specific sectors (e.g., credit cards have a BSP-set monthly cap). Otherwise, reasonableness, disclosure, and consumer-protection rules—and the courts’ equitable power—do the heavy lifting.

How long do I have to sue? As a rule of thumb: written contracts—10 years (Civil Code Art. 1144); oral—6 years. Check your facts; different claims can have different prescriptive periods.

Bottom line

A 15% weekly charge is astronomical by any metric.
While the Usury Law’s ceilings are suspended, Philippine courts and financial-consumer regulators won’t uphold predatory structures: they frequently void or slash excessive interest and penalties, and sanction abusive collection.
If you’re a borrower facing such a rate, you likely have strong grounds to challenge it. If you’re a lender, design products that would survive a fairness review in court and under RA 11765, RA 3765, RA 9474/8556, and the Civil Code.

Disclaimer: This is general information for the Philippine context, not legal advice. For a specific case, consult a Philippine lawyer, who can evaluate your documents, timelines, regulators, and remedies.