How to File a Complaint Against Unlicensed Lenders Charging Usurious Interest (Philippines)

This is general information for educational purposes and not a substitute for legal advice.

Big picture

“Usury” ceilings were suspended decades ago, so there’s no fixed legal maximum interest rate today. But courts can strike down “unconscionable” interest and reduce penalties/charges to reasonable levels.
Unlicensed lending is illegal. Entities that are not banks but habitually lend to the public must be registered with the Securities and Exchange Commission (SEC) and hold a Certificate of Authority to Operate.
Abusive collection and data-harassment are prohibited, especially by app-based lenders.
You can pursue (1) administrative complaints (to shut the lender down and penalize them), (2) criminal complaints (if there’s fraud, intimidation, or harassment), and/or (3) civil actions (to void or reduce interest, recover overpayments, and claim damages).

Key legal bases (plain-English guide)

Civil Code on loans and interest
- Interest must be in writing. If it isn’t, no interest is due.
- Courts may reduce interest and penalty charges when they are iniquitous or unconscionable.
- Attorneys’ fees and liquidated damages (e.g., “penalties”) are subject to equitable reduction.
Usury Law (Act No. 2655) & Monetary Board issuances
- Historical usury caps exist in statute, but ceiling enforcement was suspended. Result: no hard cap today, but the courts police unconscionability, case by case (e.g., sky-high monthly rates, compound-on-compound penalties, hidden fees).
Lending Companies Regulation Act (LCRA) & Financing Company Act
- Non-bank lenders that extend credit to the public must (a) register with the SEC and (b) obtain a Certificate of Authority (CA) before starting business.
- Operating without a CA is punishable (fines/closure; officers may be liable).
- SEC also issues rules on disclosures and debt collection conduct (e.g., no public shaming, threats, or unauthorized contact scraping).
Financial Consumer Protection Act (FCPA)
- Codifies rights of financial consumers: fair treatment, transparency, data privacy, protection against abusive collection, and accessible redress.
- Empowers regulators (BSP/SEC/IC/CDA) to investigate, issue cease-and-desist orders, impose penalties, and order restitution.
Other relevant laws
- Truth in Lending Act: requires clear disclosure of the true cost of credit (finance charges, APR-type disclosure).
- Data Privacy Act: forbids unlawful processing/disclosure of personal data (e.g., scraping phone contacts; “shaming” texts).
- Anti-Cybercrime and anti-harassment provisions: may apply to threats, defamation, or doxxing during collections.
- Local government codes: business permits are not a substitute for the SEC Certificate of Authority.

What counts as “unlicensed” or “illegal” lending?

You likely have an unlicensed lender if:

They lend to the public (not just occasional personal loans) and are not a bank/pawnshop supervised by BSP; and
They cannot show an SEC Certificate of Authority as a lending or financing company; or
They use fronts (e.g., sari-sari stores or “agents”) to run a lending operation for the public without SEC authority; or
They are an online lending app that never obtained the required SEC approvals.

Tip: Registration with the SEC as a corporation/partnership alone is not enough. They must also have the separate CA to operate as a lender.

What is “usurious” today?

Because ceilings are suspended, the question is unconscionability, i.e., whether the total cost of credit (interest + penalties + fees) is shocking to conscience given the circumstances. Courts have struck down rates like 4–6% per month (or higher), stacked penalties, and compound-on-compound schemes—especially when borrowers are unsophisticated or disclosures are poor. Even if the nominal rate seems “low,” hidden fees and unfair penalty ladders can make the deal unconscionable.

Common red flags

Interest quoted per day (e.g., “3% per day”) or per week without clear APR.
Front-loaded fees deducted from the loan, then interest charged on the gross.
Multiple penalties triggered by one default (e.g., late fee + penalty interest + collection fee + “visit fee”).
Public shaming and mass texts to your contacts.
Blank promissory notes, or contracts signed under pressure without copies given.

Your options: administrative, criminal, civil (you can combine them)

A) Administrative complaints (fastest for shutdown/penalties)

Primary venue: SEC (for non-bank lenders)

When to file: If the lender operates without a Certificate of Authority, or violates SEC lending rules (e.g., undisclosed charges, abusive collections, illegal online practices).
What SEC can do: Investigate, issue cease-and-desist orders, take down illegal apps/sites, impose administrative fines, and revoke/deny authority. In suitable cases, endorse for criminal prosecution.

Also consider:

National Privacy Commission (NPC): if the lender scraped contacts, broadcast your debt, or misused your personal data.
BSP Consumer Assistance (if the entity is a bank, EMI, pawnshop, or BSP-supervised).
DTI/Fair Trade angles rarely fit pure lending, but may apply if there are false advertising or retail product tie-ins.
LGU (City Hall): report business operating beyond permit or without proper line of business—useful leverage alongside SEC action.

Deliverables to prepare

Valid ID; sworn complaint-affidavit narrating facts.
Evidence: contracts, receipts, screenshots of chats/texts/app UI; call recordings; proof of payments (bank/e-wallet statements); notice letters; any threats/harassment.
If online app: exact app name, publisher, links, phone numbers, payment channels, and GCash/bank accounts where you paid.

B) Criminal complaints (if there’s fraud, threats, or harassment)

File with NBI or PNP (e.g., Anti-Cybercrime Group) and/or the City Prosecutor if you have conduct like:

Threats, extortion, defamation, doxxing, or public shaming text blasts.
Falsification or swindling (estafa)—e.g., lender misrepresented terms, forged signatures, or took payments then pretended you never paid.
Unlawful processing of personal data (NPC may also coordinate).

Criminal cases are separate from civil suits; you can pursue both.

C) Civil actions (to fix or recover money)

You can ask the court to:

Declare interest/penalties void or reduce them to a reasonable rate.
Recompute the loan and order a refund of overpayments.
Stop harassment (injunction) and claim damages (moral/exemplary) and attorneys’ fees.

Where to file

Small Claims for money claims (no lawyers required) up to the current jurisdictional amount (check latest cap; as of recent years it was substantially increased). Good for refunds/overpayments and simple loan disputes with documentary proof.
Regular trial courts for larger, complex cases or when you also seek injunctions or damages beyond Small Claims limits.

Barangay conciliation applies to many individual-vs-individual civil disputes in the same city/municipality. It generally does not apply when the respondent is a corporation or partnership, or the relief sought is injunctive or urgent.

Step-by-step: Filing an SEC complaint against an unlicensed lender

Organize your evidence
- Contracts (or proof none was given), photos/screenshots, IDs, payment proofs, app details, phone numbers, collector identities, social posts, and your timeline of events.
- Make a running spreadsheet showing date-amount-channel of every disbursement and payment.
Draft a Sworn Complaint-Affidavit (notarized)
- Parties and addresses (include app/company alias and known officers/collectors).
- Facts in chronological order: how you found the lender, terms quoted, what you signed, disbursement, collections, harassment, and lack of SEC authority (state how you learned/confirmed it).
- Violations alleged: operating without Certificate of Authority; unconscionable interest and penalties; abusive/harassing collection; failure to disclose true cost of credit; unlawful data processing.
- Prayer: cease-and-desist, administrative fines, takedown of app/pages, referral for prosecution, and restitution/refund where appropriate.
- Attach Annexes (A: ID; B: contract; C: receipts; D: screenshots; etc.), each labeled and referenced in the affidavit.
File with the SEC
- Submit your notarized complaint and annexes to the appropriate SEC department/office (walk-in or by email/portal, where available).
- Keep stamped copies or electronic acknowledgments. Note your case or reference number.
Parallel filings (optional but powerful)
- NPC complaint for data privacy abuses (contact scraping, doxxing, mass texts).
- NBI/PNP blotter and, if needed, criminal complaint for threats/harassment/fraud.
- LGU report for business permit violations.
Follow through
- Respond promptly to regulator clarifications.
- If you get a cease-and-desist order (CDO) or SEC findings, you may use them in civil court to support refund or damages claims.

How to challenge “usurious” interest in court

Compute the real cost Build a table of: principal received (net of “processing fees”), nominal rate, effective rate after fees, penalty rate(s), compounding, and all add-ons (collection fees, visit fees, “rebate loss,” etc.).
Invoke unconscionability Argue that the effective annual cost is shocking, that disclosures were unclear, and that penalties are punitive rather than compensatory. Cite circumstances: low financial literacy, pressure tactics, lack of copy of the contract, blank spaces filled in later, etc.
Ask for equitable relief Courts routinely reduce interest to a reasonable rate, cancel penalty ladders, and disallow hidden charges. They may also offset illegal charges against any balance.
Protect yourself during suit
- Deposit undisputed amounts (if feasible) and request the court to suspend collection harassment (through an injunction or by highlighting the pending case).
- Keep communication in writing; avoid admitting liability for illegal charges.

Abusive collection: what to document

Threats (“we will post your face online”), insults, or slurs.
Public shaming (posts in group chats, FB, SMS blasts to contacts).
Unauthorized contact with your employer, HR, or unrelated contacts.
Robocalls outside reasonable hours; stalking at home/work.
Data misuse (accessing photos/contacts; requiring intrusive phone permissions).

Keep: screenshots with timestamps, call logs/recordings, URLs, names/handles, and your incident diary (date, time, what happened, who witnessed).

Special notes for app-based/online loans

Many illegal apps use generic names and switch numbers. Treat GCash/bank account details as crucial identifiers.
If an app forced invasive permissions (contacts, photos) or auto-sent texts on your behalf, that’s a data privacy issue—include it in your NPC complaint.
SEC can takedown apps and pages; provide exact links, store listings, and screenshots.

Defenses lenders often raise (and how to counter)

“We’re just a referral platform.” – If they set terms, collect, or disburse, they’re functionally a lender.
“We have a Mayor’s Permit.” – Not enough. Lending to the public requires SEC Certificate of Authority.
“You consented to the rate.” – Consent doesn’t validate unconscionability or hidden/ambiguous disclosures. Interest must be clear and in writing.
“Those were collection costs.” – Fees must be reasonable and actually incurred, not automatic penalties stacked to punish.

Practical checklists

Evidence checklist

Government ID
Loan contract/PN; screenshots if no hard copy was given
Disbursement proof and all payment proofs
Chats/SMS/voice recordings; app UI showing rates/fees
List of phone numbers, emails, pages, and app links used
Contact list screenshots showing access requests (if any)
Business name/branch photos (if physical)
Incident diary (dates, times, what happened)

Complaint-affidavit outline (SEC/NPC/NBI/Prosecutor)

Affiant details (name, address, ID).
Respondent details (company/app name, numbers, officers if known).
Narrative of facts (chronology with exhibits).
Violations (cite laws/rules broadly; enumerate abusive acts).
Prayer for relief (shutdown, fines, takedown, restitution/refund, referral for prosecution).
Verification & jurat (notary).

Money math: simple way to show “unconscionable” cost

Convert everything to effective monthly and effective annual rates.
Include fees deducted upfront (which increase the true rate).
Show how penalty interest + late fees + “collection fees” multiply the total.
Demonstrate compound effects if they calculate interest on unpaid interest.

Even a “10% per month” nominal rate becomes >120% per year before fees/penalties—courts frequently find such results excessive.

If you’re already being sued by the lender

Appear and answer on time. Raise lack of license, unconscionability, defective disclosures, no written interest, and illegal penalties as defenses and counterclaims.
Ask for judicial recomputation, reduction of charges, and damages for abusive collection.
Consider consigning the undisputed principal (and a reasonable interest) to show good faith.

Frequently asked questions

Q: Can I stop paying entirely if the lender is unlicensed? A: Not automatically. Principal actually received is generally due, but illegal interest/penalties can be voided or reduced. Pair your stance with an SEC/NPC complaint and consider civil action for a court-ordered recomputation.

Q: Will a complaint erase my debt? A: Administrative penalties can shut down the lender and deter harassment, but recomputing/erasing charges usually requires a court order or a settlement.

Q: The contract says disputes go to arbitration. A: Arbitration clauses must still respect consumer protection and public policy; abusive terms can be challenged.

Q: Do I need a lawyer? A: Small Claims cases do not require a lawyer. For complex multi-agency matters, a lawyer helps—especially with injunctions and damage claims.

Sensible next steps (pick what fits your situation)

Stop engaging by phone; move to written channels and save everything.
Prepare the evidence bundle and a sworn complaint-affidavit (use the outline above).
File with SEC (unlicensed/abusive lending) and NPC (data harassment), and NBI/PNP if there are threats or fraud.
If overcharged, file Small Claims (or regular civil action) to void/reduce interest and recover payments.
For urgent harassment, explore protection via injunction and report mass-texting/defamation immediately.

If you want, I can draft a ready-to-file complaint-affidavit tailored to your facts and a simple spreadsheet to recompute the lawful balance.