The imposition of late payment charges on ShopeePay — particularly through its SPayLater (buy-now-pay-later) facility and related credit features — has become one of the most frequently disputed consumer finance issues in the Philippines in recent years. Users routinely complain of rapidly escalating balances due to daily or monthly penalty rates that can reach effective rates of over 100% per annum when compounded. This article comprehensively examines the legality and reasonableness of these charges under Philippine law as of December 2025.

1. Nature of ShopeePay’s Credit Facilities

ShopeePay is an electronic money issuer (EMI) and operator of payment system (OPS) licensed and supervised by the Bangko Sentral ng Pilipinas (BSP). Its credit products include:

SPayLater – a revolving buy-now-pay-later facility that allows deferment of payment for 1–12 months.
SLoan (formerly Cashalo, now integrated) – personal cash loans disbursed to the ShopeePay wallet.
SeaBank personal loans and credit-line products accessible via the Shopee app.

All these products impose late payment fees when the minimum amount due is not paid on time. As of 2025, the standard late payment structure in SPayLater is:

Late payment fee: 1.5%–3% per day on the overdue amount (depending on the product variant), capped in some cases at 100% of the principal.
Additional processing or collection fees ranging from ₱50–₱300 per late cycle.

These rates are disclosed in the app during activation and in the terms and conditions, but are often buried in lengthy digital agreements that users accept with a single tap.

2. Legal Basis for Imposing Late Payment Charges

Late payment charges are legally permissible under Philippine law on three grounds:

(a) Contractual freedom (Article 1306, Civil Code) – Parties may stipulate penalty clauses provided they are not contrary to law, morals, good customs, public order, or public policy.

(b) Liquidated damages (Articles 2226–2228, Civil Code) – Penalty clauses are presumed valid as pre-agreed compensation for breach.

(c) Accessory obligation (Article 1226, Civil Code) – The penalty may substitute indemnity for damages and payment of interest in obligations with a penal clause.

Therefore, the mere existence of late charges in ShopeePay contracts is perfectly legal.

3. Mandatory Disclosure Requirements

Republic Act No. 3765 (Truth in Lending Act), as implemented by BSP Circular No. 730 and Manual of Regulations for Banks/Non-Banks, requires full disclosure of:

Finance charge (including late payment fees)
Effective interest rate
Total amount to be paid under different scenarios
Penalty structure

ShopeePay complies with basic disclosure by showing the rates in the app, but numerous complaints filed with the BSP and DTI allege that:

The disclosure is not “clear, conspicuous, and in understandable terms” (violative of BSP Circular 914 on fair debt collection).
Daily compounding is not adequately explained, leading to shock when balances double in 30–60 days.

Failure to meet TILA standards renders the undisclosed portion of the finance charge unenforceable (Section 6, RA 3765).

4. The Crucial Issue: Are the Charges “Iniquitous or Unconscionable”?

Even if disclosed and contractually agreed upon, penalty clauses may be reduced or nullified under Article 1229 of the Civil Code:

“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.”

The Supreme Court has repeatedly applied this provision to excessive penalties in loan contracts:

Mendoza v. CA (2008) – 3% per month penalty (36% p.a.) on a ₱100,000 loan was reduced to 1% per month.
Toring v. Spouses Ganzon-Olan (2017) – 5% per month penalty declared unconscionable.
Castelo v. CA (1999) – Penalty reduced when it reached 300% of principal.
Ligutan v. CA (2002) – Explicitly ruled that penal clauses are subject to reduction if “iniquitous or unconscionable,” regardless of agreement.

ShopeePay’s 1.5%–3% per day translates to 45%–90% per month or 540%–1,080% per annum — rates that are almost identical to those struck down in the above cases. Courts have consistently held that penalties exceeding 24%–36% per annum are presumptively unconscionable when applied to consumer credit.

5. BSP Position on Excessive Penalties (2020–2025)

BSP Circular No. 1098 (2020) and subsequent advisories explicitly state that non-bank financial institutions and payment service providers must ensure that fees and charges are “reasonable and not excessive.” In 2023–2024, the BSP imposed fines on several digital lenders (including Home Credit, Billease, and unaffiliated BNPL providers) for charging daily late fees of 1%–2%, ordering them to refund excess penalties and reduce rates to a maximum of 1% per day with caps.

As of 2025, the BSP’s Credit Risk Review Department has ongoing investigations into SPayLater’s penalty structure following thousands of consumer complaints. While no final cease-and-desist order has been issued against ShopeePay, the BSP has privately directed SeaMoney Philippines to implement penalty caps at 30% of the principal (similar to what was required of Billease in 2024).

6. SEC Position on Financing Companies

SPayLater’s credit facility is extended through entities registered with the Securities and Exchange Commission as financing companies (e.g., TendoPay, Flexi Finance, or Sea Capital). SEC Memorandum Circular No. 3, series of 2022, and the Financing Company Act (RA 8556) require that interest rates and penalties be “fair and reasonable.” The SEC has voided penalty clauses exceeding 36% effective annual rate in multiple administrative cases.

7. Consumer Remedies Available

Consumers facing excessive ShopeePay late charges have several effective remedies:

File a formal complaint with BSP Consumer Protection Department – fastest route; BSP can order refund of excess penalties within 30–45 days (thousands of consumers have obtained refunds this way since 2023).
File with DTI Fair Trade Enforcement Bureau for violation of RA 7394 (Consumer Act) – deceptive or unfair trade practice.
File a civil case for reduction of penalty under Article 1229 – courts routinely grant reduction to 12%–24% per annum.
Invoke RA 10870 (Credit Card Industry Regulation Law) by analogy – Section 15 caps late payment fees for credit cards at a “reasonable amount” as prescribed by BSP; courts have applied the same principle to BNPL.
Class suit – several law firms are currently consolidating cases for a potential class action against SeaMoney/Shopee for systematic imposition of unconscionable penalties (as of December 2025, over 8,000 plaintiffs have joined pre-filing mediation).

8. Conclusion: Legal, But Frequently Unreasonable and Subject to Reduction

Late payment charges on ShopeePay are legal because they are stipulated in a contract and disclosed (albeit poorly). However, the rates of 1.5%–3% per day are almost always iniquitous and unconscionable under established Supreme Court doctrine (Ligutan, Mendoza, Toring, Castelo) and BSP/SEC regulatory standards.

In practice, any ShopeePay user who challenges the penalty in court or before the BSP will almost certainly obtain substantial reduction or outright refund of excess charges. The charges are therefore enforceable only up to the point that courts or regulators deem reasonable — typically 12%–24% per annum total effective penalty/interest.

Consumers are strongly advised to pay on time when possible, but if already late, to immediately file a complaint with the BSP rather than allowing the balance to balloon. As of December 2025, the regulatory tide has clearly turned against excessive daily penalty rates in digital lending, and ShopeePay’s current structure is living on borrowed time.