Overview

“Unlicensed moneylenders” include persons or entities engaged in the business of lending money without the regulatory authority required by Philippine law. “Excessive” or “unconscionable” interest refers to interest, penalties, or fees so high that courts refuse to enforce them as a matter of equity and public policy. This article explains the legal framework, common violations, remedies (administrative, civil, and criminal), and step-by-step complaint pathways—plus practical templates and evidence checklists—for borrowers who have been victimized.

Legal Framework

1) Who regulates lending?

Securities and Exchange Commission (SEC): Regulates lending companies and financing companies (generally corporations that make loans to the public). Requires SEC registration and a secondary license to operate as a lending/financing company. It may issue Cease and Desist Orders (CDOs), impose administrative fines/penalties, and revoke registrations.
Bangko Sentral ng Pilipinas (BSP): Supervises banks and certain non-bank financial institutions (e.g., quasi-banks, pawnshops, money service businesses). If the lender is BSP-supervised, you escalate to BSP Consumer Assistance instead of the SEC.
Local Government Units (LGUs): Business permits and licenses (may also be relevant for small, local operations).
National Privacy Commission (NPC): Data Privacy Act enforcement—often implicated when online or app-based lenders “shame” borrowers by blasting phone contacts.
Department of Justice (DOJ)/Prosecutors; NBI/PNP (including ACG): For criminal complaints (e.g., grave threats, coercion, libel/cyber-libel, estafa, data privacy crimes).

2) Interest ceilings and unconscionability

Usury ceilings are no longer fixed by law (interest caps were lifted decades ago). However, courts routinely strike down unconscionable interest (including penalties and liquidated damages) under the Civil Code’s principles of equity, public policy, and human relations.
Key principles commonly applied by courts:
- Freedom to contract (Civil Code) is not absolute—stipulations that are contrary to public policy or morals can be set aside.
- Interest must be expressly stipulated in writing to be collectible; otherwise no interest is due.
- Excessive interest may be reduced by courts to a reasonable rate; penalties may likewise be reduced if iniquitous or unconscionable.
- Unfair collection practices can give rise to damages (abuse of rights; acts contrary to morals, good customs, or public policy).

3) Typical violations by unlicensed lenders

Operating a lending business without SEC secondary license (if they are a corporation engaging in public lending).
Failure to disclose true cost of credit (APR, fees) and bait-and-switch interest representations.
Unfair debt collection (threats, insults, doxxing/shaming, contacting phone contacts, late-night harassment).
Data privacy violations (accessing/processing contacts, photos, or messages without lawful basis; unauthorized disclosure).
Illegal repossession of secured items without judicial process (for chattel mortgages), or breach of peace during repossession.
Retention of IDs/ATMs or coercive practices (e.g., taking selfies with IDs as “collateral”).

Are Your Contracts Void?

The loan itself is generally valid as to the principal (borrower received money); but interest, penalties, fees may be void or reducible if unconscionable or not in writing.
If a corporation engages in lending to the public without an SEC license, that is a regulatory offense. It does not automatically void your obligation to return the principal, but it supports administrative sanctions against the lender and strengthens your civil claim to reduce/void charges and recover damages.

Evidence & Documentation Checklist

Gather the following before filing any complaint:

Identity of the lender: Names, business style, addresses, app names, social media pages, telephone numbers, screenshots.
Proof of loan: Application forms, loan agreements, promissory notes, disclosures, receipts, proof of disbursement (bank transfers, e-wallet credits), proof of payments (transaction logs).
Interest/fee computation: Screenshots or clauses showing monthly rate, processing fees, penalties (per day/per month), “collection fees,” “legal fees,” etc.
Communications: Texts, chat logs, email, voice recordings (where lawful), call logs—especially any threats, insults, or shaming messages.
Data privacy abuses: Evidence that the lender accessed your contacts/photos, or messaged family/friends/employer.
Corporate/lincensing status: Company name search prints, business permit copies (if available).
Harm suffered: Medical records (if anxiety/harassment affected health), employer memos (if workplace shaming occurred), receipts for expenses, and affidavits from witnesses.

Tip: Export phone/app data and preserve originals. Name your files clearly and keep a timeline.

Remedies: Where and How to Complain

A) Administrative Complaints

1) SEC (Unlicensed Lending / Unfair Collection by SEC-covered entities)

When to file: Lender is a corporation operating public lending without a secondary license; or a licensed lending/financing company committing unfair debt collection and other violations.
Outcome sought: Cease and Desist Order, fines, possible revocation; referral to law enforcement.
What to submit:
- Complaint-Affidavit (narrative of facts + legal grounds).
- Annexes: All evidence listed above.
- IDs and contact details.
Practical note: Even if SEC proceeds administratively, you may still file a civil case to reduce/void interest and recover damages.

2) BSP Consumer Assistance (BSP-Supervised Entities)

When to file: The lender is a bank, quasi-bank, pawnshop, or other BSP-supervised institution.
Outcome: Consumer assistance, directives to the supervised entity, regulatory action.

3) National Privacy Commission (NPC)

When to file: The lender (licensed or not) harassed or shamed you by accessing or disclosing your contacts/data without lawful basis.
Outcome: Compliance orders, fines, directions to delete unlawfully processed data, and referral for criminal prosecution under the Data Privacy Act.
Evidence focus: App permissions, consent screens, contact lists, messages to third parties.

B) Civil Remedies (Courts)

Small Claims (no lawyers required, up to the prevailing jurisdictional amount):
- Goals: (a) Recover overpayments, (b) declare interest and penalties unconscionable and reduce them, (c) obtain damages for abusive practices where allowed, (d) compel proper accounting.
- Venue: Where you or the lender resides or where the cause of action arose.
Ordinary Civil Action (Regional Trial Court or MeTC, depending on amount):
- Claims: Annulment or reformation of unconscionable clauses; injunction against harassment/illegal repossession; actual/moral/exemplary damages; attorney’s fees.
Provisional Relief:
- Temporary Restraining Order/Preliminary Injunction against harassment, abusive collection, or unlawful repossession.

Courts routinely reduce interest such as 3%–10% per month (or higher) to reasonable annual rates, and strike down penalty charges that duplicate or magnify interest. The exact “reasonable rate” is case-specific, but the trend favors substantial reductions when rates/penalties shock the conscience or were not meaningfully disclosed.

C) Criminal Complaints (Prosecutor’s Office)

Grave threats, grave coercion, unjust vexation, libel/cyber-libel (for shaming), estafa (for fraudulent inducement), Data Privacy Act offenses (unauthorized processing or disclosure), anti-harassment laws, and crimes committed during illegal repossession (e.g., robbery, trespass, physical injuries).
File a Sworn Complaint-Affidavit with annexes; identify specific acts, dates, and perpetrators where possible.

Strategy: Building a Strong Case

Do a timeline (loan grant → disbursement → first collection contact → harassment).
Compute the true APR including “processing fees,” “service fees,” “collection fees,” and penalties. Hidden fees often convert a “low” monthly rate into an exorbitant effective rate.
Highlight unconscionability factors:
- Gross disparity versus market lending rates.
- Lack of meaningful disclosure (no written interest stipulation; tiny font; buried terms).
- Coercive security (IDs/ATMs retained) or data grabs.
- Multiple overlapping penalties (penalty + liquidated damages + “collection fee” + compounding).
- Harassment, shaming, or threats.
Keep paying what you reasonably can on the principal (to show good faith) into traceable channels; avoid cash hand-offs without receipts.
Never surrender IDs/ATMs and do not sign blank documents.
If a check was demanded, know that bouncing checks law (B.P. 22) is separate; consult counsel for defenses (e.g., lack of consideration due to void interest/penalties, or payments already made).
For secured loans (e.g., gadget/motorcycle with chattel mortgage): Repossession must follow the contract and the law; breach of peace or seizure without process can be restrained and penalized.

Templates

1) Complaint-Affidavit to the SEC (unlicensed corporate lender / unfair collection)

Title: Complaint-Affidavit for Unlicensed Lending and Unfair Debt Collection Complainant: (Your Name, address, contact) Respondents: (Corporate name, trade name/app name; officers, collectors) Allegations:

Respondent engages in public lending using the trade name/app “[Name]” without the required SEC secondary license; or, despite licensure, employs unfair debt collection tactics.

On (dates), I obtained a loan of ₱(amount). The written agreement (Annex “A”) states a monthly interest of (x%) plus fees (Annex “B”). Net proceeds were ₱(amount) after “processing fees” of ₱(amount).

Effective rate is (state computation and APR), grossly excessive and unconscionable.

Respondents harassed me by (screenshots Annex “C”), contacted my employer/family (Annex “D”), and threatened me with (Annex “E”).

Respondents processed and disclosed my personal data without lawful basis (Annex “F”). Prayer: Issue a Cease and Desist Order, impose administrative sanctions, require deletion of unlawfully processed data, and refer the matter for criminal action as warranted. Verification & Certification Against Forum Shopping: (standard form) Annexes: As listed.

2) Complaint to the National Privacy Commission

Subject: Unauthorized Processing and Disclosure of Personal Data by [Lender/App] Facts: App accessed my contacts/camera/storage; sent messages to contacts disclosing alleged debt; screenshots attached. Relief Sought: Order to cease processing, delete data, notify affected contacts, and imposition of penalties under the Data Privacy Act.

3) Judicial (Small Claims / Civil) – Sample Reliefs

Causes of Action: Annulment/Reduction of Unconscionable Interest and Penalties; Damages for Abuse of Rights/Unfair Collection; Accounting/Refund. Prayer:

Declare void or reduce interest, penalties, and fees to reasonable levels;

Credit all payments to principal first;

Order refund of overpayments and damages (actual/moral/exemplary) with attorney’s fees;

Enjoin harassment and unlawful disclosure of data;

Other just and equitable relief.

Practical Q&A

Q1: I borrowed from a person (not a corporation). Can I still complain? Yes. Harassment, threats, shaming, and data privacy abuses are actionable regardless of corporate status. Civil courts can still reduce unconscionable interest. Regulatory action at the SEC applies when the lender is a corporation acting as a lending/financing company; otherwise, criminal or civil routes and LGU business regulation may apply.

Q2: If the lender is unlicensed, do I still owe anything? Typically yes, the principal, but interest/fees may be void/reduced. Administrative penalties hit the lender; civil courts ensure fairness between you and the lender.

Q3: The lender keeps my government ID/ATM. Is that allowed? No. Confiscating IDs/ATMs is abusive and may violate multiple laws/regulations. Demand return in writing and include this in your complaints.

Q4: They posted my photo/loan details on Facebook and messaged my boss. That can amount to privacy violations, cyber-libel, and harassment. Preserve screenshots/links and file with the NPC and the Prosecutor’s Office.

Q5: What is a “reasonable” replacement rate when courts reduce interest? It varies by case. Courts look at prevailing market rates, disclosure, bargaining power, and the totality of fees/penalties. Many decisions slash monthly rates to modest annualized rates and delete duplicative penalties.

Step-by-Step Playbook

Secure your data: Revoke app permissions; change passwords; back up evidence.
Write a demand letter:
- Dispute usurious/unconscionable interest and unfair collection;
- Offer to pay principal less illegal fees;
- Demand stop to harassment and data deletion.
File with the proper regulator (SEC or BSP) and the NPC if privacy abuses occurred.
Consider small claims for refunds/damages and a judicial declaration reducing interest/penalties.
Escalate criminally for threats, coercion, libel/cyber-libel, privacy crimes, and illegal repossession.
Stay organized: Number your annexes; keep a master index; maintain a log of all harassment incidents.

Red Flags (and How to Respond)

“Processing fee” deducted upfront that makes the effective interest explode → Compute APR and document; challenge.
Daily penalties (e.g., 3%/day) plus a “collection fee” → Argue duplication and unconscionability.
Contact-list access requirement → Note lack of genuine consent; raise with NPC.
Threats of arrest for mere non-payment → Debt is not a crime; arrest threats are coercive and can be criminal.
“We’ll take your motorcycle tonight.” → Illegal self-help if without lawful process; seek injunction and report to police.

Drafting Tips for Your Complaint

Lead with licensing (unlicensed status or misuse of a license).
Attach a clean interest/fee table showing nominal vs effective rate.
Quote the abusive messages verbatim (with dates/timezones).
Cite the Civil Code themes: abuse of rights, unconscionable stipulations, lack of written interest agreement, and the court’s power to reduce penalties.
Ask for specific relief: CDO, deletion of data, damages, reduction/voiding of interest, refunds, injunction.

Quick Model Interest/Fee Breakdown (insert your numbers)

Loan Face Amount: ₱10,000
Less “Processing Fee” (10%): ₱1,000
Net Proceeds Received: ₱9,000
Stipulated Interest: 15%/month = ₱1,500/month
Late Penalty: 5%/day of amount due
“Collection Fee”: ₱500 per follow-up

Effective Rate Indicators: If you received only ₱9,000 but pay interest as if you received ₱10,000, your true cost of credit is significantly higher. Add penalties/fees and compounding to demonstrate unconscionability.

Final Notes

Even without fixed usury ceilings, Philippine courts and regulators do not tolerate predatory or harassing practices.
You can pursue multiple tracks simultaneously: SEC/BSP for regulation, NPC for privacy, civil court for refunds/reductions, and the Prosecutor for crimes.
Meticulous documentation and a calm, organized presentation of the facts dramatically improve outcomes.

This article provides general information for educational purposes and is not a substitute for tailored legal advice. For case-specific strategy, consult a Philippine lawyer or your local PAO/IBP chapter.