Complaining About High Interest Rates in Online Lending (Philippine Context)

This article explains Philippine laws, regulators, rights, remedies, and practical steps when contesting high (and hidden) interest in online lending apps and platforms.

1) The landscape: who regulates what

Securities and Exchange Commission (SEC). Regulates lending companies (LCs) and financing companies (FCs), including their online lending platforms (OLPs). Licensing, conduct rules, advertising and disclosure, and bans/suspensions fall here.
Bangko Sentral ng Pilipinas (BSP). Regulates banks, quasi-banks, and EMIs (e-money issuers). If your loan came from a bank (even via an app), use the BSP channel.
National Privacy Commission (NPC). Handles Data Privacy Act violations—e.g., phonebook scraping, doxxing, mass-texting your contacts, public shaming via group chats.
Department of Justice / NBI / PNP Anti-Cybercrime. For criminal conduct: threats, extortion, cyber libel, unlawful disclosure of personal data, stalking/harassment.
Courts. Civil cases to reduce/void unconscionable interest, stop abusive practices, and recover damages.

Key distinction: If the lender is SEC-licensed (typical for OLPs not owned by banks), complain to the SEC. If it’s a bank/EMI, complain to the BSP. Data privacy abuses go to the NPC regardless.

2) Interest rate law in the Philippines: the pillars

Freedom to contract, but not without limits. Parties may agree on interest, but the Civil Code voids terms contrary to law, morals, good customs, public order, or public policy (Art. 1306), and courts may strike down or reduce “iniquitous or unconscionable” rates (e.g., long-standing Supreme Court rulings beginning with Medel v. CA and successors).
No fixed usury ceiling—but courts police excess. The Usury Law ceilings were effectively suspended decades ago; this is why some lenders quote very high “monthly” rates. Yet courts routinely cut down unconscionable interest and penalties and may award damages for abusive conduct.
Truth in Lending Act (R.A. 3765). Requires clear disclosure of the finance charge and the effective rate before you become obligated—so you can compare offers and understand the real cost.
Financial Consumer Protection Act (R.A. 11765). Strengthens regulator powers against unfair, deceptive, or abusive acts and practices (UDAAP); mandates internal redress mechanisms, and enables restitution and administrative sanctions.
SEC conduct rules for LCs/FCs and OLPs. The SEC has issued circulars and memoranda governing:
- Caps/limits on interest and certain fees for small, short-term loans offered by LCs/FCs and their OLPs;
- Mandatory disclosures (no hidden charges);
- Unfair debt collection prohibitions (no threats, shaming, profanity, or contacting people in your phonebook who are not co-makers/guarantors);
- Registration rules for OLPs (each app accounted for, with corporate and physical office disclosures).
Exact caps and thresholds change by circular. When you complain, cite the latest SEC circular number shown in your loan documents/app or on the SEC site and attach the screenshots.
BSP rules for banks/credit cards. BSP maintains interest/fee caps or ceilings for credit cards and polices transparency for bank loans. If your app loan is from a bank/EMI, BSP rules apply.
Data Privacy Act (R.A. 10173).
- Lawful processing and proportionality: scraping your phonebook or blasting your contacts is usually unlawful without consent and necessity.
- Breach/complaint: you may complain to the NPC, especially for doxxing, workplace shaming, or nonconsensual disclosure.
Constitution, Art. III, Sec. 20. No imprisonment for debt. Mere non-payment on a loan is civil, not criminal. Threats of arrest for simple non-payment are unlawful (separate from cases like bouncing checks or estafa where independent criminal elements must be proven).

3) What counts as “high” interest—and how it hides

A) Nominal vs. Effective Interest Rate (EIR)

Nominal rate: the headline (e.g., “3% monthly”).
EIR: the real cost considering interest + fees (processing, service, transfer, “convenience”) and the fact you often receive less than the face amount.

Quick check (monthly EIR approximation):

$$ \text{Monthly EIR} \approx \frac{\text{Interest + Fees}}{\text{Cash actually received}} $$

Annualize by roughly multiplying by 12.

Example: Borrow ₱5,000, term 30 days. App deducts a ₱500 “service fee”; it also charges ₱150 “interest.” You receive ₱4,500.

Charges = ₱650.
Monthly EIR ≈ 650 / 4,500 = 0.1444… (14.44%).
Annualized ≈ 14.44% × 12 = ~173.3% p.a.

Even if the app claims “3% per month,” the effective cost is much higher because of fees and net proceeds.

B) Penalties, rolled-over fees, and reloan traps

Late penalties, “extension fees,” and forced “top-ups” can send the EIR sky-high.
Courts often reduce excessive penalties (Civil Code Art. 1229).

C) Non-disclosure and mislabeling

Hiding fees, burying key rates, or advertising “0%” while deducting large “service fees” can be deceptive under R.A. 11765 and SEC rules.

4) When is a rate or practice illegal or actionable?

Unconscionable rates/penalties → Courts may reduce or nullify them.
Rate/fee caps breach (for loans covered by SEC caps or BSP caps) → Regulatory violation.
Lack of pre-contract disclosure of total finance charge/EIR → Truth in Lending and FCPA violation.
Unfair collection (threats, doxxing, profanity, public shaming, contacting uninvolved contacts) → SEC unfair collection and Data Privacy violations; may also be criminal (grave threats, unjust vexation, cyber libel).
Operating without SEC license/registration or using an unregistered app → Illegal lending; the SEC regularly halts or bans such OLPs.

5) How to complain—step by step

Step 1: Identify the regulator

Check your contract/app “About/Company” page, email footer, or receipts for the corporate name and license.
- Bank/EMI? Go BSP.
- Lending/Financing company or OLP? Go SEC.
- Any data-privacy abuse? Also go NPC.

Step 2: Build your file (evidence pack)

Include:

Government ID; your loan contract/summary; screenshots of the app’s quoted rate/fees; disbursement proof (what you actually received); repayment records; collection messages (show phone numbers, timestamps); call recordings (if any, and lawful); proof of employer/friend harassment; privacy policy screenshots; company details.

Step 3: Write to the lender first (short, dated email)

Demand:

Full breakdown of principal, interest, all fees/penalties, and EIR/APR;
The legal basis for any caps/charges;
A stop to unfair collection and unauthorized data processing;
A corrected computation and waiver/reduction of unlawful charges.

(Doing this shows good faith and helps with regulators.)

Step 4: File with the right agency

A) SEC (for LCs/FCs/OLPs)

Grounds: excessive/unconscionable rates, breach of SEC caps, failure to disclose, unfair collection, unregistered app.
Relief: refund/adjustment, administrative fines/suspension against the company, take-downs of abusive OLPs.
Attach: evidence pack + your demand letter + the lender’s reply (or non-reply).

B) BSP (for banks/EMIs)

Grounds: breach of BSP caps (e.g., on credit cards), non-disclosure, UDAAP.
Relief: adjustment/refund; supervisory action vs. bank/EMI.
Attach: same as above.

C) NPC (privacy abuses)

Grounds: phonebook scraping, contacting people without legal basis, public shaming, unlawful disclosure, excessive data retention.
Relief: compliance orders, penalties, and orders to cease processing and delete unlawfully collected data.
Tip: Name the Data Protection Officer (if listed) and show that you tried to resolve first.

D) Law enforcement (criminal conduct)

If there were threats of harm/arrest, extortion, or cyber libel, go to NBI or PNP Anti-Cybercrime with your evidence pack.

E) Courts (civil action)

Seek: judicial reduction/voiding of interest/penalties, damages, and injunctions against harassment.
Strategy: File where you reside or where the cause of action arose; ask counsel about small-claims vs. regular civil action (consider defendant type, claims, and relief sought).

6) Practical playbook (what usually works)

Compute the EIR and put it in writing. Show how fees jack up the real rate.
Cite the laws: R.A. 3765 (disclosure), R.A. 11765 (UDAAP), Civil Code (unconscionability), SEC unfair collection rules, Data Privacy Act.
Ask for a recomputation (waive/trim fees and penalties; restructure into affordable installments).
Draw a hard line on harassment: “Cease and desist contacting my employer/contacts who are not co-makers/guarantors.”
Keep everything: screenshots, logs, call recordings, proof of who was contacted and when.
Mind your channels: Only pay via official channels and insist on a Statement of Account before paying.
Don’t be intimidated by arrest threats: non-payment of a simple loan is not a crime.

7) Red flags in online lending apps

No clear corporate name, SEC/BSP license, or physical office.
“0%” but large “service/processing” deductions at disbursement.
Short tenors with forced renewals/top-ups to “avoid” penalties.
Access to contacts, photos, and files without a clear necessity.
Harassment scripts (“We will call your HR,” “We will post your photo”).

8) Template language you can adapt

A) Demand for Disclosure/Recomputation (to the lender)

Subject: Request for EIR Disclosure, Legal Basis of Charges, and Account Recalculation

I refer to Loan No. ________ dated ________. Please provide within five (5) days:

A complete breakdown of principal, interest, all fees/penalties, and the Effective Interest Rate (EIR/APR) per R.A. 3765 and R.A. 11765;

The legal/SEC/BSP basis for each fee/penalty and any applicable rate caps;

A recomputation removing undisclosed/unauthorized charges and reducing any unconscionable interest/penalties under the Civil Code;

Written confirmation that your staff/agents will cease contacting persons who are not co-makers/guarantors and will refrain from unfair collection practices under SEC rules and the Data Privacy Act.

I reserve all rights, including to file with the SEC/BSP/NPC and to seek damages.

B) SEC Complaint (for LCs/FCs/OLPs)

I am filing a complaint against [Company, SEC Reg. No.] (operating the app [App Name]).

Issues: (a) Excessive/unconscionable interest/fees; (b) Violation of SEC caps; (c) Failure to disclose EIR/charges; (d) Unfair collection (threats/public shaming); (e) Data scraping/unauthorized disclosures.

Facts: [Timeline, amounts, screenshots, computation of EIR, who was contacted, dates.]

Relief sought: Order the company to (1) recompute and refund/waive unlawful charges; (2) cease unfair collection and data abuses; (3) face administrative sanctions.

C) NPC Complaint (privacy)

The respondent [Company/App] accessed my phonebook and contacted persons without legal basis/consent and publicly disclosed my debt. These acts violate the Data Privacy Act (lawful purpose, proportionality, data minimization, and confidentiality). I request a cease-processing order, deletion of unlawfully collected data, and penalties.

9) FAQs

Can they jail me for non-payment? No, not for a simple debt. Threats of arrest for non-payment are abusive.
They messaged my boss—legal? Typically not, unless your boss is a co-maker/guarantor. This is often both an SEC and Data Privacy violation.
I already paid more than I borrowed. Ask for a full accounting and recomputation; consider an SEC complaint and/or civil action to reduce/void unconscionable charges and recover overpayments.
The app says it’s “licensed,” but doesn’t show details. Treat as a red flag and escalate to SEC with screenshots.

10) Checklist before you file

I know whether my lender is SEC-licensed or a bank/EMI.
I have all screenshots/contracts and an EIR computation.
I sent a written demand and kept proof.
I listed specific abusive acts (who, what, when).
I’m filing with SEC/BSP and, if privacy was abused, with NPC.

Final notes (read this!)

Circulars and caps change. When you file, quote the most recent SEC/BSP circular shown in your loan disclosures/app and attach proof.
Court rulings consistently protect borrowers from iniquitous/unconscionable rates and abusive collection.
For tailored strategy and court action thresholds, consult counsel—especially if you seek damages or injunctive relief.

This guide is general information, not legal advice.