Excessive Fees and Harassment by Online Lending Apps in the Philippines A Comprehensive Legal Analysis (2025)
Abstract
The explosive growth of smartphone-based “online lending platforms” (OLPs) since 2016 has vastly expanded micro-credit access in the Philippines, but it has also spawned two systemic abuses: (1) imposition of exorbitant, non-transparent interest and ancillary charges, and (2) harassment—often tech-enabled—of borrowers and their personal contacts. This article surveys every major Philippine statute, regulation, enforcement action, jurisprudence, and proposed reform that governs (or should govern) these practices as of 3 July 2025.
I. The Rise—and Risks—of Philippine OLPs
Market context. Cash-strapped Filipinos embrace short-tenor “salary-advance” loans as small as ₱1,000. Fin-tech lenders bypass brick-and-mortar costs, but many operate without the capitalization, governance, or consumer-protection culture required of traditional lenders.
Typical abusive pattern.
- Nominal interest advertised as 1–4 % per day, translating to effective annual rates (EARs) of 1,000 %+.
- Add-on fees (processing, verification, disbursement, convenience) deducted upfront—sometimes 30 – 40 % of principal—so the borrower never actually receives the face amount.
- Collection harassment via robo-calls, SMS blitzes, social-media shaming posts, spoofed legal threats, contact-list blasting, doxxing, death threats or use of manipulated nude photos.
II. Regulatory Architecture
| Instrument | Coverage | Key Provisions Relevant to OLP Abuse |
|---|---|---|
| Republic Act No. 9474 (Lending Company Regulation Act of 2007) | All “lending companies” not banks/fiservs | SEC licensing; Sec 12 criminalizes unlicensed lending (₱10k – ₱50k fine / 6 mos–10 yrs jail). |
| Republic Act No. 11765 (Financial Products and Services Consumer Protection Act, 2022) | All providers of credit or payment products, including apps | Fair treatment (Sec 4); unlawful “harassing, abusive, misleading” collection (Sec 50); empowers BSP/SEC to issue caps & cease-and-desist orders (CDOs). |
| BSP Circular No. 1133 (s. 2022) | Small-value, short-term consumer loans ≤ ₱10k, ≤ 90 days | Caps: nominal interest ≤ 6 %/month; effective interest ≤ 15 %/month; penalties & fees ≤ 5 % of unpaid principal per month. |
| SEC Memorandum Circular No. 18 (s. 2019) | All online lending platforms | Mandatory disclosure of corporate name in app stores; express ban on contact-list harvesting and humiliating collection tactics. |
| SEC MC 28 (s. 2021) | Lending/financing company registration | Requires “Business Model Compliance Checklist” describing fee structure, privacy permissions, and collection protocols prior to app launch. |
| Data Privacy Act of 2012 (RA 10173) & NPC Circular No. 20-01 | Personal data processing | “Least-intrusive means” principle; fines up to ₱5 M and imprisonment 1–3 yrs for unauthorized disclosure to third parties (contact-list blasts). |
| Cybercrime Prevention Act of 2012 (RA 10175) | Online libel, cyber-threats | Used against collectors who post defamatory content or intimate photos. |
| Credit Card Industry Regulation Law (RA 10870) & BSP Circular No. 1165 (2023) | Analogous caps & harassment ban for cards; invoked by analogy when OLP offers virtual cards. |
III. Unconscionable Fees: Legal Limits
- Post-Usury Era & Judicial Review. Although the Usury Law ceiling was suspended in 1983, Philippine courts may still strike down “unconscionable and iniquitous” rates under Art. 1229 Civil Code. Supreme Court has repeatedly reduced 3 %/month (≈36 % p.a.) to 12 % p.a. (e.g., Spouses Abellera v. Fifeld, G.R. 181719, 2019).
- Statutory caps for micro-loans. BSP Circular 1133’s 6 %/mo cap now provides a concrete benchmark for “reasonableness” in small-value OLP loans. A July 2024 BSP study shows 78 % of unregistered OLPs still exceed this limit.
- Hidden fees = unfair banking practice. RA 11765 Sec 45 penalizes failure to provide “key facts statement” (KFS) disclosing total cost of credit in APR and nominal peso terms. SEC may fine ₱50k per violation plus suspension.
IV. Harassment & Abusive Collection
| Act or Regulation | Prohibited Conduct | Typical OLP Violation Modes |
|---|---|---|
| RA 11765 Sec 50 | “Use of violence, threats, obscene language, or disclosure to unauthorized persons” | Mass-texting the borrower’s phone contacts with defamatory content; threats of arrest. |
| SEC MC 18-2019 | “Contacting persons in borrower’s directory other than guarantors” | App forces permission to upload phonebook during onboarding. |
| NPC 2021 Decision ‘Juarez et al. v. Fynamics/PondoPeso’ | Unlawful processing & disclosure | ₱200k fine + order to delete data of 2.1 M users; first major “contact-list” harassment case. |
| BSP Circular 1048 (2019) (pre-RA 11765) | Fair treatment for BSP-supervised FIs | Template for SEC to craft MC 18. |
| Revised Penal Code Art. 282 (Grave threats) & Art. 353 (Libel) | Criminal harassment | Collectors send edited nude images alleging prostitution. |
V. Enforcement Landscape (2019 – 2025)
- Cease-and-Desist Blitz. As of May 2025 the SEC has issued CDOs against 437 OLPs and revoked 60 lending company licenses for repeated violations.
- Joint-Task Force “HARAP” (Harassment Response and Abatement Program) launched January 2023 by SEC, NPC, DICT-Cybercrime Unit, PNP-ACG. Result: 92 takedown orders served on Google Play & App Store; 38 arrests for cyber-libel.
- Landmark NPC rulings. – NPC Case No. DP-22-007 (Oct 2022) clarified that “friend tagging” posts on Facebook to pressure repayment constitute “unauthorized processing for non-compatible purpose.”
- First criminal conviction. April 2024: Pasig RTC convicted two officers of unregistered OLP OurSure Peso for RA 9474 Sec 12 (unlicensed lending) + cyber-libel; sentences: 2 yrs – 8 yrs & ₱2 M total fines.
VI. Remedies Available to Borrowers
| Remedy | Forum | Relief Obtainable |
|---|---|---|
| Administrative complaint vs. licensed lender | SEC CGFD (within 4 yrs of violation) | Suspension, revocation of license; refund of fees; disgorgement. |
| Data privacy complaint | National Privacy Commission | Order to discontinue processing, erase data, indemnity ₱1k–₱20k per affected individual. |
| Financial Consumer Assistance Mechanism (FCAM) | BSP or SEC, under RA 11765 | 30-day mediation; written decision; may impose fines up to ₱2 M per act. |
| Civil action (small claims ≤ ₱1 M) | Metropolitan/Municipal Trial Courts | Annul unconscionable interest; damages for moral, exemplary injuries; TRO vs. harassment. |
| Criminal prosecution | DOJ/RTC | RA 9474; RA 10173; libel; grave threats. Private complainant may pursue civil damages within the criminal case. |
Statute of limitations: Data-Privacy offenses – 2 yrs; Libel – 1 yr; RA 9474 – 5 yrs; Civil actions on written contracts – 10 yrs.
VII. Compliance Blueprint for Legitimate Fin-Tech Lenders
- Transparent Pricing – Provide Key Facts Statement and APR calculator; disallow disbursement of net-of-fees amount.
- Interest-Rate Governance – Adopt board-approved “Reasonable Rate Policy” anchored to BSP Circular 1133.
- Privacy-by-Design – Collect only device ID and necessary KYC files; never require full contact-list or photo gallery.
- Ethical Collection Code – Follow BSP Circular 1165 call-script standards; prohibit calls/SMS between 9 p.m.–6 a.m.; maintain call log.
- Whistle-blower & Audit Mechanism – Annual third-party audit of collection communications; mandatory incident reporting to SEC within 5 days of harassment allegation.
VIII. Legislative & Policy Gaps
| Gap | Pending Bill / Proposal (19th Congress) | Salient Feature |
|---|---|---|
| Statutory APR ceiling for all micro-credit | House Bill 6686 “Online Lending Regulation Act” | 30 % p.a. APR cap; criminalizes “loan shaming” (₱500k fine). |
| Central registry of OLPs | Senate Bill 1366 | SEC–DICT shared registry; real-time app-store delisting feed. |
| Safe-harbor for borrowers | HB 7714 | Bars suit to collect fees > two-times principal if lender unlicensed. |
| Mandatory cyber-harassment insurance | BSP concept paper (2024) | Requires lenders to carry liability cover for privacy breaches. |
IX. Comparative Insights
- Indonesia & India have banned contact-list harvesting outright and imposed 40 % p.a. APR caps.
- EU Consumer Credit Directive 2023 sets an interest-plus-fee cap at the national average APR × 2. Philippine regulators study similar modular cap.
- Kenya’s CBK (2022) uses a Digital Credit Providers (DCP) License, requiring localized data storage and officer fit-and-proper tests—an emerging template for the SEC-BSP Digital Lending Framework (draft, June 2025).
X. Conclusion
While technology has democratized access to credit for millions of unbanked Filipinos, it has also enabled lenders to mask exorbitant costs and automate harassment at scale. The Philippine legal framework has rapidly evolved—RA 11765, BSP Circular 1133, SEC MC 18—but enforcement remains whack-a-mole without a unified digital-lending statute. Until Congress enacts comprehensive reforms, regulators must leverage existing powers to cap fees, police privacy, and prosecute harassment, while courts continue to strike down unconscionable interest. Borrowers, armed with clearer remedies and growing jurisprudence, need not suffer in silence. Vigilant implementation of the measures detailed above promises to curb predatory practices and foster a responsible digital-credit ecosystem where access does not come at the expense of dignity.