Short answer. No. Civil Code Article 1957 voids any contract or stipulation, under any cloak or device whatever, that is intended to circumvent the laws against usury. Dressing interest up as a service fee, processing charge, or any other label does not shield a lender if the real purpose is to get around usury limits.
What the law says
Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void.
Civil Code, Article 1957 — Void Usury-Circumventing Contracts. Read the full provision →
What the law says
The borrower may recover in accordance with the laws on usury.
Civil Code, Article 1957 — Void Usury-Circumventing Contracts. Read the full provision →
What Article 1957 actually voids
The rule is written broadly on purpose: contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. It does not list out the specific tricks it is aimed at. Instead it targets the intent behind a stipulation — if a clause exists mainly to get around the laws on usury, it is void, whatever form it takes and whatever it is called in the contract.
Why the label on a charge does not decide the question
Because the article speaks of "any cloak or device whatever", relabeling excessive interest as a service fee, documentation charge, processing cost or similar item does not, by itself, take it outside this rule. What matters is what the charge actually functions as and why it was structured that way, not the word used for it in the loan document. A lender cannot make a usurious arrangement lawful simply by naming the excess something other than interest.
What the law gives the borrower back
The article adds that the borrower may recover in accordance with the laws on usury. This article itself does not spell out the mechanics of that recovery or set the rates at issue; it points you to the separate body of usury law that governs the details of what can be recovered and how. If a stipulation is found to be a device circumventing usury, this text is the ground for voiding it, and the usury laws it refers to fill in the rest.
What to gather if you suspect this is happening to you
Pull together the loan agreement and any fee schedule, and work out what the true cost of the loan comes to once every charge is counted, not just the figure labeled "interest". Note when each fee is charged and whether it is tied to the amount or duration of the loan the way interest would be, since that pattern is often what points to a device rather than a genuine cost. Bring the full paper trail to a lawyer before assuming any single label settles the question.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Spouses David B. Carpo, et al. vs. Eleanor Chua, et al, G.R. No. 150773, September 30, 2005 — read the decision on LawPhil →
- First Metro Investment Corporation vs. Este del Sol Mountain Reserve, Inc., et al, G.R. No. 141811, November 15, 2001 — read the decision on LawPhil →
- Investors Finance Corporation vs. Autoworld Sales Corporation, G.R. No. 128990, September 21, 2000 — read the decision on LawPhil →