Introduction

The explosion of online lending applications in the Philippines over the past decade has provided millions of Filipinos with quick access to credit, especially those who are unbanked or rejected by traditional financial institutions. However, this convenience has come with a dark side: hundreds of unregistered, predatory lending platforms that charge exorbitant interest rates, impose hidden fees, and employ violent harassment and public shaming when borrowers default.

A question that now arises daily in legal advice groups, TikTok comments, and courtrooms is straightforward: If the online lender is not registered with the SEC, do I still have to pay the loan?

The short, unequivocal legal answer is: No. You are not legally obligated to pay any amount — principal, interest, penalties, or fees — because the entire loan contract is void ab initio (void from the beginning).

The Legal Framework Governing Lending Companies

Lending as a business in the Philippines is a regulated activity.

Republic Act No. 9474 (Lending Company Regulation Act of 2007) and its Implementing Rules and Regulations explicitly state that no entity may engage in the business of lending without first securing a Certificate of Authority (CA) from the Securities and Exchange Commission (SEC).
Republic Act No. 8556 (Financing Company Act of 1998) similarly requires registration for financing companies.
The SEC’s Manual of Regulations for Non-Bank Financial Institutions and various SEC Memorandum Circulars (particularly SEC MC No. 18, s. 2019 and SEC MC No. 19, s. 2020) govern the operations of both traditional and online lending platforms.

Any person or entity that regularly extends loans to the public as a business, whether through a mobile app, website, or Facebook page, is engaged in the “lending business” and must be SEC-registered. There are no exceptions for “small” lenders, “peer-to-peer” platforms, or foreign-based apps.

Unregistered Lending is Illegal Per Se

Operating a lending business without SEC registration is a criminal offense punishable under Section 12 of RA 9474 with imprisonment of up to five years and fines of up to ₱500,000, or both. Each loan extended constitutes a separate violation.

Because the very act of lending without authority is prohibited by law, any contract arising from such illegal activity falls squarely under Article 1409 of the Civil Code:

“The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
…”

The Supreme Court has repeatedly held that contracts executed in violation of mandatory or prohibitory laws are void ab initio (e.g., Tongoy v. CA, G.R. No. L-45645, April 30, 1983; Arsenio Reyes v. CA, G.R. No. 147758, June 26, 2003).

Therefore, the loan agreement with an unregistered online lender has no legal existence. It creates no obligation on the part of the borrower to pay anything.

There is No Valid Obligation — Not Even the Principal

A common misconception propagated by some collectors (and even by a few misinformed lawyers) is that “you only don’t have to pay the interest and penalties, but you still have to return the principal.”

This is legally incorrect in the context of unregistered lenders.

When a contract is void ab initio, there is no loan to begin with. The money transferred to the borrower is not a “loan” in the eyes of the law; it is an amount delivered under a void title.

The principle of in pari delicto (both parties equally at fault) does not apply here because the law was enacted precisely to protect the public from predatory lending practices. Allowing the illegal lender to recover even the principal would defeat the very purpose of RA 9474 and reward criminal behavior.

Philippine courts have consistently refused to aid parties engaged in illegal activities. In the analogous case of unregistered “5-6” Bombay lenders (who are also unlicensed), lower courts and even the Supreme Court have ruled that the lender forfeits all right to recover any amount when the lending is illegal.

The same principle applies with even greater force to online lending apps that systematically violate multiple laws (usury in practice, data privacy, cyberlibel, unfair debt collection, etc.).

The Lender Cannot Sue You in Court

An unregistered lender who files a collection case will see the case dismissed at the earliest stage because:

The contract is void and cannot be the basis of any cause of action.
The plaintiff is engaged in an illegal business and comes to court with unclean hands.
Judges routinely dismiss such cases motu proprio upon discovery that the plaintiff has no Certificate of Authority.

In practice, unregistered online lenders never file legitimate court cases precisely because they know the contract will be declared void and they risk criminal prosecution.

Payments Already Made Cannot Be Recovered by the Lender, and You May Even Recover Them

Any amount you have already paid to an unregistered lender was paid under a void contract. If the payment was made under threat, duress, or intimidation (very common with these apps), you may file an action for recovery of the money plus damages under Articles 19, 20, 21, and 1390–1391 of the Civil Code (abuse of rights, acts contra bonus mores, and voidable/void contracts).

Practical Consequences for Borrowers

You may legally ignore demands for payment from unregistered lenders.
Block the app, its agents, and all related numbers.
Do not engage or negotiate. Any acknowledgment or partial payment may be twisted as “ratification” (though even ratification cannot validate a void contract under Article 1409).
Save all evidence of harassment (screenshots, messages, edited photos, calls to your contacts).
File complaints with:
- SEC (online at sec.gov.ph/complaint)
- National Privacy Commission (privacy.gov.ph) — for Data Privacy Act violations
- PNP Anti-Cybercrime Group
- NBI Cybercrime Division
- Office of Cybercrime under the Department of Justice

Relevant Criminal Laws That These Lenders Routinely Violate

RA 10175 (Cybercrime Prevention Act) – cyberlibel, online threats, computer-related identity theft
RA 9995 (Anti-Photo and Video Voyeurism Act) – distribution of edited nude/shame photos
RA 10173 (Data Privacy Act of 2012) – unauthorized processing and disclosure of personal data
Article 287 of the Revised Penal Code – unjust vexation (for incessant calls/texts)
Article 282 – grave threats/coercion
RA 11765 (Financial Products and Services Consumer Protection Act of 2022) – unfair debt collection practices (punishable by fines up to ₱10 million)

A single harassment campaign by these apps often violates five to seven criminal laws simultaneously.

How to Know If Your Lender Is Legitimate

Go to the official SEC website:
https://www.sec.gov.ph/lending-companies-and-financing-companies-2/list-of-registered-lending-companies/

As of December 2025, only around 200+ entities are authorized to operate online lending platforms. Popular legitimate apps include GCash (GCredit), Maya Credit, CIMB, Tala (registered entity), JuanHand (registered), UnaCash (registered), and a few others. If the app is not on the SEC list, it is illegal.

Moral vs. Legal Obligation

While you have no legal duty to pay an unregistered lender, some borrowers choose to return the principal out of personal ethics when they are able. That is a personal decision. The law, however, does not require it and will not assist the illegal lender in any way.

Conclusion

Under Philippine law, a loan from an unregistered online lender is not a loan at all — it is a nullity. The contract is void from the beginning, creates no obligation whatsoever on the borrower, and cannot be enforced in any court.

You do not have to pay. Full stop.

You are, in fact, encouraged by the SEC, DOJ, and law enforcement agencies to refuse payment and instead report these criminal enterprises so they can be shut down.

The law exists to protect you, not the predator. Use it.