Can 5-6 lenders be arrested without a warrant?

In an article posted in his Facebook account on Tuesday, Agriculture Secretary Manny Piñol said that during the first Cabinet meeting in 2017, President Rodrigo Duterte ordered the arrest and deportation of Indian nationals involved in the 5-6 money lending scheme, in an effort to help small-time entrepreneurs that often fall victim to this usurious activity. 

"Sobra na yan. Pautangin ng 5-6 (interest rate) tapos bentahan pa ng mahal na mga appliance. Patay talaga ang pobre dyan," Piñol quoted President Duterte as saying.

During an interview, Justice Secretary Vitaliano Aguirre III explained that while the 5-6 lending scheme was not illegal following the suspension of the Usury Law, he said that these 5-6 lenders may be arrested even without a warrant for operating without the necessary permits.

Central Bank Circular No. 905 series of 1982—which took effect as on Jan 1, 1983—had removed the ceiling on interest rates prescribed by the usury law (Spouses Villanueva v. CA, G.R. No. 163433, August 22, 2011).

As pointed out by Secretary Aguirre, the imposition of high interest rates is not per se illegal since there is no law which prohibits or regulates the same.  It is the act of engaging in the lending business without the necessary authority that makes 5-6 lenders criminally liable.

But can these 5-6 lenders be arrested without a warrant?

Lending requirements

First, let us take a look at the business of lending.

The lending business is among the regulated industries in the Philippines.  Government regulators, such as the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC), have established stringent rules and regulations that must be complied with by institutions engage in this type of business. 

The regulatory requirements vary, depending on the type of lending institution involved (e.g. a bank, a financing company, a pawnshop or a lending company).  A common requirement, however, is the need for a permit or license before these institutions may engage in lending activities. 

Any institution or entity that shall enter into lending activities without the necessary permit may be punished under the law.  For example, under the Lending Company Regulation Act of 2007, no lending company shall conduct business unless an authority to operate has been granted by the SEC. 

Violators may be punished with a fine up to P50,000.00 or imprisonment of up to 10 years, or both.

Warrantless arrests

The Rules on Criminal Procedure provides for 3 instances when a warrantless arrest is valid. 

Among these instances is the arrest of a person in flagrante delicto – that is, when in the presence of a police officer, the person has committed, is actually committing, or is attempting to commit a crime.

For a 5-6 lender to be arrested without a warrant, it must be sufficiently proven by an arresting officer that at the time of arrest, the lender was actually conducting lending activities without the necessary permit. 

This is because when lending activities are done without a valid permit, the act is considered criminal.  

It is in this context that the validity of a warrantless arrest of a person accused of engaging in a 5-6 lending scheme would have to be determined on a case-to-case basis. 

For instance, what if a police officer sees an Indian national receiving money from a market vendor? Does the police officer have authority immediately make an arrest?  Does the police officer know that the Indian national does not have a permit to engage in lending activities?  Would vendors cooperate with police officers and take away their steady source of financing?

The campaign against 5-6 lending scheme is undoubtedly laudable.  However, there must be a balance between the desire to stop proliferation of the 5-6 lending scheme and due process guaranteed by our laws and Constitution. —NB, GMA News

Katrine Paula Suyat teaches teaches Criminal Law and Legal Research at the San Beda College of Law. The seventh placer in the 2014 bar exams, Suyat is an associate at Gatmaytan Yap Patacsil Gutierrez & Protacio Law Offices.