In the Philippines, the lending industry is regulated to protect consumers from predatory practices, harassment, and "unconscionable" interest rates. While the Central Bank (Bangko Sentral ng Pilipinas) suspended the ceiling on interest rates for most loans years ago, the Supreme Court has consistently ruled that rates that are "excessive, iniquitous, unconscionable, and exorbitant" are illegal and can be struck down.
1. Understanding Your Rights: The Legal Basis
Two primary laws and several circulars govern lending practices in the Philippines:
- The Truth in Lending Act (Republic Act No. 3765): Requires lenders to provide full transparency regarding the cost of credit, including finance charges and interest rates, before the transaction is finalized.
- The Consumer Act of the Philippines (Republic Act No. 7394): Protects against deceptive, unfair, and unconscionable sales acts and practices.
- BSP Circular No. 1133 (Series of 2021): Specifically targets Financing Companies (FCs) and Lending Companies (LCs), setting ceilings on interest rates and fees for small-value, short-term loans (often applicable to online lending apps).
2. Common Violations to Watch For
Before filing a complaint, identify the specific violation:
- Excessive Interest Rates: While there is no fixed "usury" law limit for all loans, the Supreme Court often finds rates exceeding 24% to 36% per annum as potentially unconscionable, depending on the circumstances.
- Harassment and Unfair Collection Practices: This includes shaming the borrower, contacting people in the borrower's contact list without consent, using threats or insults, and misrepresenting oneself as a lawyer or court official.
- Lack of Disclosure: Failure to provide a Disclosure Statement before the loan is signed.
- Hidden Fees: Charges that were not explicitly stated in the initial agreement.
3. Step-by-Step Process for Filing a Complaint
Step 1: Document Everything
Gather all evidence before notifying the lender of your intent to complain.
- Copy of the Loan Agreement and Disclosure Statement.
- Proof of payments (receipts, screenshots of bank transfers).
- Screenshots of threatening messages, call logs, or social media posts (for harassment cases).
- A summary of the computed interest vs. the actual principal.
Step 2: Formal Demand Letter
Send a formal letter to the lending company's compliance officer. State clearly that you find the rates unconscionable or the collection practices illegal. Demand a restructuring of the loan or a cease-and-desist from harassment.
Step 3: File a Complaint with the Relevant Regulatory Body
The agency you approach depends on the type of lender:
| Type of Lender | Regulatory Body |
|---|---|
| Banks & Credit Card Companies | Bangko Sentral ng Pilipinas (BSP) |
| Financing & Lending Companies (including Apps) | Securities and Exchange Commission (SEC) |
| Cooperatives | Cooperative Development Authority (CDA) |
| Micro-Lenders / Small Shops | Department of Trade and Industry (DTI) |
Step 4: Specialized Filing for Online Lending Apps (OLAs)
If you are a victim of "cyber-shaming" or data privacy violations by an online lender:
- National Privacy Commission (NPC): File a complaint if they accessed your contacts or photos without permission.
- SEC Corporate Governance and Finance Department: Use their specialized email for lending complaints (
cgfd_pic@sec.gov.ph).
4. Remedial Action through the Judiciary
If the regulatory bodies cannot resolve the issue, or if the lender sues you for non-payment, you can raise the following defenses in court:
- Petition for Reformation of Instrument: Asking the court to rewrite the contract because the interest rate is "void ab initio" (void from the beginning) for being against public policy.
- Consignation: If the lender refuses to accept a "fair" payment, you can deposit the amount you believe is legally owed to the court.
Legal Note: If a court finds an interest rate unconscionable, it does not mean the debt is extinguished. Usually, the court will strike down the illegal rate and replace it with the legal interest rate (currently 6% per annum as per BSP Circular No. 799).
5. Privacy and Protection Against Harassment
Under SEC Memorandum Circular No. 18 (Series of 2019), lenders are strictly prohibited from:
- Using profanity or "threatening" language.
- Contacting people in a borrower’s contact list (unless they were named as guarantors).
- Disclosing the borrower's name as a "deadbeat" or "scammer" on social media.
Violation of these rules can lead to the revocation of the lender's Certificate of Authority (CA) to operate.