Here’s a practical, everything-you-need-to-know legal guide—Philippine context—on Excessive Interest and Charges by Online Lending Apps (OLAs). This is written for borrowers, in-house counsel/compliance, and advocates who need a clean decision tree, sample computations, remedies, and pitfalls.

Big picture

There is no across-the-board statutory interest ceiling in the Philippines since the Usury Law’s ceilings were suspended decades ago.
But courts, regulators, and enforcers still strike down interest, penalties, and charges that are unconscionable, iniquitous, or contrary to public policy.
OLA operators are generally lending/financing companies regulated by the SEC (not the BSP, unless a bank is involved). Their collection conduct is tightly policed; shaming, harassment, and doxxing can trigger SEC sanctions and Data Privacy Act liability.
You can challenge excessive terms and abusive practices in civil cases (including small claims) and through administrative complaints (SEC for lending rules; NPC for data privacy; DTI/LGU for consumer-protection angles, case-by-case).

Key legal anchors (what the rules boil down to)

Freedom to stipulate interest ≠ freedom to be oppressive.
- Courts routinely reduce interest rates and penalties when they are unconscionable or grossly excessive given the transaction’s nature.
- If no valid interest is proven (e.g., defective stipulation), the court generally applies the legal interest (currently 6% per annum) from the proper reckoning date.
Penalty charges and compounding are not immune.
- Even if interest seems “moderate,” stacked charges (processing fees deducted upfront, late penalties per day, compounded interest, collection fees, “liquidated damages,” and high “service” fees) can be collectively unconscionable. Courts may strike them down or reduce them.
Unfair debt collection is illegal.
- SEC rules prohibit shaming, profanity, threats, contacting persons in your phonebook, publishing your debt, contacting you at unreasonable hours, or pretending to be law enforcement.
- The Data Privacy Act outlaws scraping/using contacts and photos for harassment, and the NPC has penalized apps for this.
Licensing matters.
- A “lending app” must be operated by an SEC-registered lending/financing company (and, if it runs an online platform, it must follow SEC platform rules). Unregistered or front operations face closure, fines, and criminal liability. Contracts with illegal operators are vulnerable.

How “excessive” gets tested (practical judicial yardsticks)

Courts look at the totality:

Stipulated rate (e.g., 2–10% per month is a red flag; courts have repeatedly pared down rates in that band, depending on facts).
Loan size/tenor and borrower vulnerability (small, short-term loans to consumers draw stricter scrutiny).
Stacked fees: upfront “processing”/“service” fee (especially if net proceeds are far below the face amount), daily late fees, attorney’s fees, and compounding.
Transparency: whether terms were clearly disclosed before disbursement; “drip pricing” weighs against the lender.
Conduct: abusive collection and misrepresentations support public policy reduction of charges.

Outcomes the courts commonly order:

Reduce interest to a reasonable level or replace it with legal interest (6% p.a.) from default or filing.
Strike down penalty interest/fees as unconscionable, or cap them (e.g., make penalties non-compounding and limited to a reasonable % of principal).
Disallow duplicative charges (e.g., late fee + penalty interest + “collection fee” for the same delinquency).
Grant moral/exemplary damages and attorney’s fees to borrowers in egregious cases (especially with harassment/doxxing).

Interest & charges—how to compute (and spot abuse)

A. Face rate vs. effective rate (EIR)

If a ₱10,000 “14-day” loan deducts a 10% “processing fee” (₱1,000) upfront and charges 2% per day late fee:

Cash received: ₱9,000 (not ₱10,000).
If you repay ₱10,000 in 14 days, your effective cost is ₱1,000/₱9,000 = 11.11% in 14 days (~290% p.a. simple), excluding late fees.
If you’re late 10 days with 2% per day on ₱10,000, that’s another ₱2,000, often compounded. Courts see this stacking as iniquitous.

B. Compounding traps

Interest on interest and penalty on interest are classic targets for judicial reduction.
“Daily penalty” plus “monthly penalty” plus “collection fee” for the same default is often excessive.

Rule of thumb: If the total charges (interest + fees + penalties) sprint past the principal over a short delay, you likely have an unconscionability case.

Unfair collection practices (what OLAs may not do)

Shaming/doxxing: messaging your contacts, posting on social media, group chats, workplace threads.
Threats/insults/obscenity, or implying arrest for civil debt.
Misrepresentation: pretending to be police/authority/lawyer, or sending fake “warrants.”
Harassing hours: repeated calls/texts at unreasonable times.
Unauthorized data use: accessing phonebook/photos, using them to coerce payment.

Consequences: SEC complaints can lead to fines, suspension, or revocation of license/authority; DPA breaches can mean administrative fines and criminal exposure; evidence of abuse bolsters civil damages.

Your remedies (choose all that fit)

1) Dispute/restructure, in writing

Send a formal demand/dispute letter:
- Assert unconscionability of interest/fees; demand recomputation (e.g., legal interest or reasonable rate, no compounding, strike duplicative charges).
- Offer good-faith payment of principal + fair interest.
- Object to harassment and data misuse; revoke consent to contact non-references; require communications in writing.

2) SEC complaint (lending/collection abuses & unregistered activity)

Basis: excessive/abusive charges, unfair collection, non-registration, or platform violations.
Relief: administrative sanctions, closure orders, referral for prosecution.

3) NPC complaint (Data Privacy Act)

Basis: unauthorized access to contacts/photos, disclosure to third parties, lack of lawful basis, failure to secure data, harassment using scraped data.
Relief: cease-and-desist, administrative fines/sanctions; supports damages claims.

4) Civil action (incl. Small Claims)

Small Claims (≤ the current threshold; no lawyers required): sue to declare/reduce charges, recover excess paid, and stop harassment.
Ordinary civil action: seek reformation/annulment of unconscionable terms, damages, and attorney’s fees; ask court to set reasonable interest (or legal interest) and cap penalties.

5) Criminal/Regulatory

If the operator is unregistered or uses false pretenses, or commits data privacy crimes, pursue criminal complaints through proper agencies/prosecutors.

Defenses when you’re sued by an OLA

Unconscionability of interest/penalties/compounding; ask court to reduce or strike.
Lack of clear assent to hidden fees (drip pricing; unreadable fine print).
Failure of consideration (e.g., “processing fee” for non-existent service).
Unlicensed lender (if applicable).
DPA violations (counterclaims for damages when harassment/doxxing occurs).
Payment set-off: apply all payments first to principal (ask court), disallow illegal compounding.

Evidence to keep (build your file)

Screenshots of the app’s pricing page before disbursement; final loan disclosure; net proceeds actually received.
E-mail/SMS/chat logs showing harassment, threats, shaming scripts, or fake legal threats.
Call recordings (if lawful), lists of contacts harassed, and time stamps (e.g., calls at midnight).
Copies of IDs/consents you provided; app permissions screens.
Payment proofs (bank slips, e-receipts) and the app’s ledger; note any auto-deducts.
If sued, get the lender’s SEC registration/platform details and terms of service.

Compliance checklist for OLA operators (to avoid sanctions)

Register properly with the SEC (and, if operating an online platform, comply with the specific platform rules).
Disclose: APR/EIR, fees, repayment schedule, no hidden charges.
No contact scraping or harassment; restrict collection to borrower and declared references, at reasonable hours, with polite language.
Privacy: minimize data, limit purpose, secure storage, document lawful basis for processing.
No compounding by default; if used, disclose and ensure it’s reasonable.
Cap penalties to a reasonable non-compounding amount; avoid duplicate penalties.

Practical playbook for borrowers (step-by-step)

Freeze the ledger: Request a full statement and written recomputation; stop phone-book permissions in the app’s OS while you dispute (document this).
Send a dispute letter: Offer to pay principal + fair interest; demand deletion of shaming posts and privacy compliance.
Complain to SEC/NPC if harassment continues; attach screenshots and proofs.
Pay what is fair (deposit to lender’s official account) and document it; if refused, keep proof of tender.
If sued, invoke unconscionability and seek judicial recomputation; bring all proof of charges and harassment.
If you sue (small claims), attach a matrix: Principal, “interest” pieces, penalties, fees, and your proposed recomputation (e.g., 6% p.a. simple, no compounding, reasonable one-time late fee).

Quick recomputation template (you can adapt)

Principal: ₱ ________
Stipulated interest: (state % and tenor) → seek reduction to:
- Option A: Legal interest 6% p.a. from default date to payment; no compounding.
- Option B: Reasonable monthly rate (e.g., ≤ 1–2%/mo) simple, with cap on penalties.
Penalties/late fees: Strike duplicative ones; keep a single non-compounding penalty (e.g., ≤ a reasonable % of amounts due).
Fees deducted upfront: Recharacterize as interest for EIR; disallow if for no service.

FAQs (fast answers)

Is any rate legal if I clicked “Agree”? No. Courts can void or reduce unconscionable rates/penalties despite consent.

Can they call my boss/friends? No. Harassment/shaming and contacting non-references can violate SEC rules and the Data Privacy Act.

They keep adding “daily penalties” and “collection fees.” You can challenge compounding and duplicative charges; ask the court/SEC to strike or cap them.

I already paid more than the principal. Do I still owe? Maybe not. With a recomputation (reasonable interest; no compounding/duplicates), you may be overpaid; seek refund/offset.

The lender isn’t in the SEC list. Red flag. Document and complain; contracts with illegal operators are vulnerable to regulatory and criminal action.

Bottom line

No fixed cap doesn’t mean anything goes. Courts and regulators curb excessive rates, compounding, and abusive fees—and punish harassment/doxxing.
Build a paper trail, demand recomputation, and use SEC/NPC channels.
In litigation (or small claims), push for reasonable/simple interest, no compounding, and striking of stacked charges—plus damages if collection turned abusive.

If you want, I can turn your actual loan ledger (screenshots, due dates, payments) into a clean recomputation table you can attach to a demand letter or small-claims filing.