Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard, one of the credit card facilities of respondent BPI.

She
made some purchases through the use of the said credit card and defaulted in paying for said purchases. She subsequently
received a letter dated from respondent BPI, demanding payment of the amount of PhP 141,518.34. Under the Terms and
Conditions Governing the Issuance and Use of the BPI Credit and BPI Mastercard, the charges or balance thereof remaining unpaid
after the payment due date indicated on the monthly Statement of Accounts shall bear interest at the rate of 3% per month and an
additional penalty fee equivalent to another 3% per month.

For failure of petitioner Macalinao to settle her obligations, respondent BPI filed with the MeTC of Makati City a complaint for a sum
of money against her and her husband, Danilo SJ. Macalinao. (BPI vs. Spouses Ileana Dr. Macalinao and Danilo SJ. Macalinao). In
said complaint, respondent BPI prayed for the payment of the PhP 154,608.78 plus 3.25% finance charges and late payment
charges equivalent to 6% of the amount due and an amount equivalent to 25% of the total amount due as attorney‘s fees, and of the
cost of suit. After the summons and a copy of the complaint were served upon petitioner Macalinao and her husband, they failed to
file their Answer. Thus, respondent BPI moved that judgment be rendered in accordance with Section 6 of the Rule on Summary
Procedure. This was granted. In its Decision, the MeTC ruled in favor of BPI and ordered petitioner Macalinao and her husband to
pay the amount of PhP 141,518.34 plus interest and penalty charges of 2% per month,

Petitioner Macalinao and her husband appealed to the RTC of Makati City which affirmed the decision of the MeTC. Then they filed
a petition for review with the CA. The CA affirmed with modification the Decision of the RTC. The modification was with respect to
the total amount due and interest rate (3%). In its assailed decision, the CA held that the amount of PhP 141,518.34 (the amount
sought to be satisfied in the demand letter of respondent BPI) is clearly not the result of the re-computation at the reduced interest
rate as previous higher interest rates were already incorporated in the said amount. Thus, the said amount should not be made as
basis in computing the total obligation of petitioner Macalinao. Further, the CA also emphasized that respondent BPI should not
compound the interest in the instant case absent a stipulation to that effect. The CA also held, however, that the MeTC erred in
modifying the amount of interest rate from 3% monthly to only 2% considering that petitioner Macalinao freely availed herself of the
credit card facility offered by respondent BPI to the general public. It explained that contracts of adhesion are not invalid per se and
are not entirely prohibited.

ISSUES/HELD:
 Should the interest rate be reduced from 9.25% to 2% since the stipulated rate of interest was unconscionable

and iniquitious? Yes

RATIONALE:
 The Interest Rate and Penalty Charge of 3% Per Month or 36% Per Annum Should Be Reduced to 2% Per

Month or 24% Per Annum

In its Complaint, respondent BPI originally imposed the interest and penalty charges at the rate of 9.25% per month or 111% per
annum. This was declared as unconscionable by the lower courts for being clearly excessive, and was thus reduced to 2% per
month or 24% per annum. On appeal, the CA modified the rate of interest and penalty charge and increased them to 3% per month
or 36% per annum based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, which governs the
transaction between petitioner Macalinao and respondent BPI. BPI asserts that said interest rate and penalty charge are reasonable
as the same are based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.

We find for petitioner. The interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24%
per annum.

Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3%
interest rate. Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36% per
annum as excessive and unconscionable. We held in Chua vs. Timan: ―The stipulated interest rates of 7% and 5% per month
imposed on respondents‘ loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle
we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous,
unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.‖ Since the stipulation
on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason
and equity demand.

The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of
the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per month.
Pertinently, Article 1229 of the Civil Code states: ―The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by
the courts if it is iniquitous or unconscionable.‖

In the instant case, the records would reveal that petitioner Macalinao made partial payments to respondent BPI, as indicated in her
Billing Statements. Further, the stipulated penalty charge of 3% per month or 36% per annum, in addition to regular interests, is
indeed iniquitous and unconscionable.

Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA at 1.5% monthly to 1%
monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per month or 24% per annum in line
with the prevailing jurisprudence and in accordance with Art. 1229 of the Civil Code.

Accordingly, petitioner Macalinao is ordered to pay respondent BPI the following:
 (1) The amount of one hundred twelve thousand
three hundred nine pesos and fifty-two centavos (PhP 112,309.52) plus interest and penalty charges of 2% per month from January
5, 2004 until fully paid;
 (2) PhP 10,000 as and by way of attorney‘s fees; and
 (3) Cost of suit.