A full guide to the legal caps, contract defenses, abusive-collection rules, data-privacy leverage, and practical remedies

I) The big picture: what law still bites despite “no usury”

The usury law’s ceilings are effectively suspended, but excessive interest and penalties are still illegal in three ways:

Civil Code controls
- Art. 1956: Interest must be in writing; otherwise only legal interest may be imposed after default.
- Arts. 1229 & 2227: Courts may reduce or strike penalties and liquidated damages that are iniquitous or unconscionable.
- Courts routinely cut per-day or multi-percent per month charges, disallow interest on interest unless expressly and fairly stipulated, and delete duplicative fees.
Consumer disclosure & unfairness rules
- Truth-in-Lending principles require clear, conspicuous disclosure of all finance charges (interest, processing, service, late/penalty, collection, and renewal/rollover fees) and the effective cost of credit. Hidden or post-hoc charges are contestable.
Sectoral regulation
- SEC governs lending/financing companies and online lending platforms (OLPs): imposes rate/fee ceilings for small, short-term consumer loans; bans abusive collection; requires registration and disclosure.
- BSP regulates banks/e-money issuers/credit cards, including ceilings on card finance charges and penalties and strict collection conduct rules.

Bottom line: caps + disclosure + civil unconscionability together give borrowers strong grounds to recompute debts and shut down harassment.

II) What “excessive” looks like in practice

Per-day interest or penalties (e.g., 1–2% per day) that snowball in a week.
Stacked charges (interest plus late fee plus penalty plus “liquidated damages” for the same default).
Undisclosed “processing,” “system,” “protection,” or “renewal” fees; forced rollovers.
Front-loaded deductions that reduce cash-out but compute interest on the gross loan.
Compounded default interest without clear, fair stipulation.
Collection fees at 20–30% flat with no proof of reasonableness.

Courts typically: (a) void or slash the unconscionable portions, (b) apply legal interest from default on the net obligation, (c) apply payments to principal first, and (d) deny bloated attorney/collection fees.

III) Abusive collection = separate violations

Regardless of how much you owe, collectors cannot:

Shame debtors (mass texts to contacts, social posts, edited photos, office/school blasts).
Threaten arrest/estafa for mere non-payment, violence, deportation, or public exposure.
Call outside reasonable hours, use obscene language, or spam third parties not named as references.
Scrape phonebooks/galleries for intimidation.

These practices can trigger criminal, administrative, civil, and data-privacy liability—independent of the loan.

IV) Data Privacy Act (DPA) leverage against OLP harassment

Valid consent must be freely given, specific, informed. Blanket access to your contacts/galleries is overbroad for ordinary lending.
Purpose & proportionality: Even data validly collected cannot be used to broadcast debts; that’s unlawful processing.
Your tools: File complaints with the National Privacy Commission for cease-and-desist, erasure orders, and fines; claim moral/exemplary damages in court for privacy breaches.

V) Contract defenses you can assert

No written interest/penalty clause → Only legal interest after default; strike penalties.
Unconscionability → Ask court to reduce rates/penalties to reasonable levels or to legal interest only.
Lack of disclosure → Void/disallow undisclosed fees under Truth-in-Lending principles.
Unregistered/unauthorized lender → Raise as defense and basis for SEC action; can support damages for unfair practices.
Misapplication of payments → Demand application to principal first after disallowing unlawful charges.
Penalty duplication/compounding → Challenge “interest on interest” and stacked sanctions for one default.

VI) Practical out-of-court playbook (fast relief)

Evidence kit
- In-app contract and disclosures (screenshots/recordings), receipts/e-wallet logs, call/SMS logs, harassment posts (with URLs/timestamps), permissions the app requested, and a clean ledger of cash-ins/payments.
Demand letter (email + registered mail)
- Dispute unlawful or undisclosed charges; demand recomputation to principal + disclosed lawful charges + reasonable/ legal interest;
- Order cease-harassment, third-party contact ban, and data erasure (revoke consent to contacts access);
- Offer settlement on sanitized numbers with mutual release and account closure.
Regulatory pressure (parallel)
- SEC: unfair/deceptive acts, abusive collection, unregistered OLP; attach your proof.
- NPC: unlawful processing and doxxing; request immediate CDO.
- BSP (if bank/e-money issuer is principal): consumer assistance complaint.
- App stores: report policy violations for takedown leverage.

VII) In-court options & venues

Small Claims (no lawyers needed): reclaim illegal fees/damages or resolve the true balance after recomputation, up to the jurisdictional ceiling.
RTC Injunction/Declaratory Relief: enjoin harassment, declare specific penalty/fee clauses void, require data deletion, and set the lawful amount.
As defenses/counterclaims in a collection suit: assert unconscionability, lack of disclosure, privacy breaches, and abusive collection, with claims for moral/exemplary damages and attorney’s fees.

Prescriptive notes: Money-claim and tort actions generally 4 years for injury to rights; written contracts 10 years; unfair-collection torts can be pursued promptly while the account is disputed.

VIII) Worked recomputation (illustrative)

Facts

Cash received: ₱5,000 (app deducted ₱500 “processing fee” upfront).
Contract says 1%/day interest, 2%/day penalty after day 7, plus 25% collection fee.

Sanitization

Disallow undisclosed/unclear processing fee → treat as part of principal (effective principal ₱5,500 if fee was netted from disbursed amount), or deduct from claimed balance if charged on top.
Treat 1%/day and 2%/day as unconscionable → replace with legal interest from default, simple not compounded.
Strike 25% collection fee absent proof of reasonableness; allow only taxed costs or modest attorney’s fee if litigated.
Apply payments to principal first, then sanitized interest.
Result: Judgment only for net principal + legal interest, no shaming, no third-party contacts.

IX) If you’re already being harassed

Send a cease-and-desist + DPA revocation (demand deletion and stop processing third-party data).
Notify your employer/school with a memo asking that calls be logged and directed to you/counsel; harassment of third parties strengthens damages.
File NPC and SEC complaints immediately; reference case numbers in all correspondence.
Consider a quick RTC application for TRO/Prelim Injunction to stop doxxing and abusive contact while the recomputation is sorted.

X) For compliant lenders (risk-reduction checklist)

Clear, conspicuous APR/EIR and full fee table; disable undisclosed auto-rollovers.
Reasonable, non-stacked late fee (flat or modest per-month), no per-day snowballing.
No contact-list scraping; limited, documented outreach windows; call-recording compliance.
Collections SOP consistent with sector rules; vendor oversight for third-party collectors.
Data-privacy DPIA, least-privilege access, and fast erasure workflows for revoked consent.

XI) Quick templates

A) Borrower demand (excerpt)

We dispute your quoted balance. Your interest/penalties are unconscionable and several charges were not conspicuously disclosed. Recompute to principal + disclosed lawful charges + reasonable/legal interest only. Cease contacting third parties and delete contact-list data. Further harassment will be reported to the SEC and NPC and pursued for damages.

B) Settlement with release (excerpt)

Without admitting liability, I will pay ₱[amount] representing principal + sanitized charges in full settlement. In exchange, you will issue a written release, close the account, cease all collection, and delete personal data except what the law requires you to retain.

XII) Bottom line

Even in a post-usury world, excessive penalties in online short-term loans don’t stand. Between SEC/BSP caps, Truth-in-Lending, Civil Code reductions, and the Data Privacy Act, borrowers can force a lawful recomputation, stop harassment, and recover damages for abusive practices. Move fast: preserve evidence, demand recomputation, file SEC/NPC complaints, and—if needed—seek injunction or small-claims relief so you pay only what the law truly allows.