I. Overview

Online lending and “instant cash” apps have exploded in the Philippines. Many are legitimate; many are not. A growing problem is excessive interest and abusive collection practices that trap borrowers in a cycle of debt.

This article explains, in a Philippine legal context:

When interest becomes “excessive” or “unconscionable”
Which agencies regulate online lenders and apps
How to report abusive or illegal practices
What legal remedies borrowers may pursue

It is written for information and education only and is not a substitute for personalized legal advice.

II. Legal Framework on Interest and Online Lending

1. Usury law vs. “unconscionable” interest

Usury Law (Act No. 2655)
- Historically set interest ceilings.
- Central Bank (now BSP) Circular No. 905 (1982) effectively lifted the ceilings, allowing parties to agree on interest rates.
- Important: Usury is no longer criminally punished, but that does not mean a lender can charge anything without limit.
Civil Code limits – “unconscionable” interest

Courts can strike down interest rates that are “iniquitous or unconscionable”, relying on provisions such as:
- Article 1306 – Freedom to stipulate terms is limited by law, morals, good customs, public order or public policy.
- Article 1229 – Courts may reduce penalties if they are iniquitous or unconscionable.
- Article 1409 – Contracts contrary to law, morals, good customs, public order, or public policy are void.
The Supreme Court has repeatedly reduced interest rates (including those around 3–6% per month or higher) as unconscionable, and replaced them with a reasonable rate (often the legal interest of 6% per annum on monetary obligations).

Takeaway: even without a fixed statutory ceiling, courts can cut down excessive interest.
Legal interest rate
- Judicial/legal interest on loans and forbearance of money is effectively set at 6% per annum.
- When courts void an unconscionable interest clause, they usually substitute a reasonable rate (often 6% p.a.) and recompute the obligation.

2. Regulatory framework for online lending

a. Securities and Exchange Commission (SEC)

The SEC regulates:

Lending companies – under the Lending Company Regulation Act (RA 9474)
Financing companies – under the Financing Company Act (RA 8556)
Their online lending platforms (OLPs) and apps

The SEC:

Issues Certificates of Incorporation and Certificates of Authority to lending/financing companies
Publishes lists of registered and unregistered / unauthorized online lending apps
Can suspend or revoke licenses and issue cease and desist orders
Issues rules on:
- Disclosure of interest, fees and total cost
- Prohibition of harassing, humiliating, or abusive collection methods
- Standards for online and app-based lending operations

If your online lender is a “lending” or “financing” company (as many apps are), SEC is usually the primary regulator.

b. Bangko Sentral ng Pilipinas (BSP)

The BSP regulates:

Banks (universal, commercial, thrift, rural, cooperative)
Digital banks
Certain non-bank financial institutions, such as some e-money issuers and credit card issuers

For products like:

Personal loans from banks
Credit cards
Salary loans through banks
Some “Buy Now, Pay Later” or digital lending tools attached to e-wallets

BSP has:

A Financial Consumer Protection Framework
Disclosure rules for loan terms and effective interest rates
Specific caps for some products (e.g., maximum credit card finance charge per month, caps on some fees, subject to updates)

If your loan is from a bank, digital bank, or e-wallet product covered by BSP, your complaint on excessive interest goes through the BSP consumer protection process.

c. Financial Products and Services Consumer Protection Act (RA 11765)

RA 11765 (2022) strengthened consumer protection for financial products and services, including digital and online offerings:

Key features:

Covers banks, lending and financing companies, money service businesses, payment systems, and other financial service providers.
Requires fair treatment, responsible pricing, transparency, and data privacy.
Mandates internal dispute resolution (IDR) and proper handling of complaints.
Empowers regulators (BSP, SEC, Insurance Commission, etc.) to:
- Issue rules
- Conduct on-site and off-site examinations
- Impose administrative sanctions and even recommend criminal prosecution.

This law is an important foundation when reporting unfair, deceptive or abusive interest and practices in apps.

d. Consumer protection, data privacy, cybercrime

Other laws that may be relevant:

Data Privacy Act (RA 10173) – protects personal information. Relevant when apps:
- Access your contacts without valid consent
- Send messages to your contacts to shame you
- Over-collect and misuse your data
Consumer Act (RA 7394) – covers unfair trade practices and deceptive advertising.
Cybercrime Prevention Act (RA 10175) – if there are threats, defamatory posts, or unauthorized access committed online.
Revised Penal Code and special laws – for grave threats, coercion, libel, extortion, etc.

III. When Is Interest “Excessive” or “Unconscionable”?

There is no fixed number in the law today for all loans, but courts and regulators look at factors such as:

Level of interest vs. prevailing rates
- Is it far above typical bank or microfinance rates?
- Monthly interest often exceeding 10%–20%, coupled with short terms and penalties, is frequently attacked as oppressive (though each case is fact-specific).
Effective interest rate (EIR) or “true cost”
- Some apps say “2% per month” but:
  - Charge huge processing fees
  - Shorten terms (e.g., 7 or 14 days instead of a month)
  - Add penalties, service fees, collection fees, etc.
- The effective interest can end up being several hundred percent per year.
Information and consent
- Were interest rates and fees:
  - Clearly disclosed?
  - Shown before you clicked “accept”?
- If interest or fees were hidden or misleading, this supports a complaint.
Collection practices
- Harassment does not directly change the rate, but abusive practices:
  - Strengthen a case that the lender is predatory and acting contrary to law and morals.
  - Can be separately sanctioned and give rise to damages.
Borrower’s circumstances
- Courts look at equity and fairness: if a vulnerable borrower is pressured into unconscionable terms, this weighs against the lender.

Bottom line: If the overall cost of borrowing is grossly higher than reasonable market levels, especially through hidden charges and short terms, a strong argument exists that the interest is unconscionable, and the stipulation may be void or reduced.

IV. Determine Who Regulates Your Lender

Before reporting, identify what type of lender you are dealing with:

Is it a bank or digital bank?
- Has a branch, bank name, and is clearly a bank (BPI, BDO, LANDBANK, etc.), including their official online loan products.
- Regulator: BSP
Is it a lending/financing company app?
- Often uses terms like “Lending Corp”, “Finance Corp”, “Lending Inc.” in the legal name.
- Operates primarily via mobile apps, social media ads, or websites.
- Regulator: SEC (lending/financing companies and their online platforms)
Is it a retail seller or appliance store offering installment?
- Offering credit as part of a sale of goods (e.g., appliance store installment plan).
- Primary regulator for retail trade practices: DTI (plus, possibly, BSP if tied to a bank card or loan).
Is it a completely unregistered, informal, or “colorum” lender?
- No SEC registration, no clear entity, only a messenger or GCash number.
- You may still complain to SEC (for operating without authority), PNP/NBI for possible estafa or illegal lending, and other agencies as applicable.

V. Documenting Your Case (Evidence Checklist)

Before reporting, secure all possible evidence. This is crucial both for regulatory complaints and any future court case.

1. Loan documents

Screenshots or PDF of:
- Loan application screens
- Terms and conditions
- Checkboxes you clicked (“I agree…”)
Any e-contract, promissory note, app notification, or email stating:
- Amount borrowed
- Interest rate, fees, and penalties
- Payment schedule and due dates

2. Payment history

Receipts (GCash, Maya, bank transfers, remittance slips)
Screenshots of “paid” status inside the app
Statements of account, if available

3. Communications

Text messages, emails, chat messages (Messenger, Viber, etc.) from:
- The lender or collection agents
- Showing threats, shaming, or abusive language
Recordings of calls (if any) – ensure you comply with basic privacy and evidence rules (avoid illegal wiretapping; one-party consent is often enough in civil complaints, but criminal evidence rules are stricter—consult a lawyer for sensitive matters).

4. Proof of harassment or shaming

Screenshots showing messages sent to:
- Your contacts or relatives
- Your employer or colleagues
Social media posts made by the lender or its agents about you
Any evidence of doxxing (sharing your personal details publicly)

5. Proof of damage

If harassment caused:
- Loss of a job
- Health issues (medical records)
- Emotional distress (psychological consultation records)
These can support claims for moral, exemplary, and actual damages in a civil case.

Organize these in a folder. When you report, you can attach these as PDFs, screenshots, or printouts.

VI. How to Report Abusive Online Loans and Apps

1. Internal complaint to the lender

Under RA 11765 and implementing rules, financial service providers are generally required to have an Internal Dispute Resolution (IDR) process.

Practical steps:

Write a formal complaint (email or in-app):
- State:
  - Your full name, contact details
  - Account number or loan reference
  - Amount borrowed and total paid
  - Why you believe the interest and charges are excessive or misleading
  - The abusive collection behaviors you experienced
- Demand:
  - Re-computation of your obligation at a reasonable rate
  - Cessation of harassment and privacy violations
  - Written response within a reasonable period (often 7–15 business days)
Save proof that you submitted this complaint.

If the lender ignores you or gives an unsatisfactory response, you escalate to regulators.

2. Reporting to the SEC (for lending/financing companies & apps)

If the app is a lending/financing company or operates like one:

What you can complain about:

Charging unconscionable interest, fees, and penalties
Misleading disclosures (e.g., saying “low interest” but charging huge hidden fees)
Harassing and humiliating collection methods:
- Threatening messages
- Public shaming
- Contacting your employer and family to embarrass you
Operating without SEC registration or without a Certificate of Authority
Using unregistered online lending platforms

What to include in a complaint:

Your personal details and contact information
Exact name of the app and its corporate entity (if known)
Screenshots showing:
- Installation of the app and user interface
- Interest rate & charges
- Messages, threats, or harassment
Copies of:
- Loan agreements, if any
- Proof of payments
A narrative: what happened, when, and how the lender violated your rights

Possible outcomes (administrative):

SEC may:
- Issue warnings or advisories against the app
- Order the app/company to cease operations
- Suspend or revoke Certificates of Authority
- Impose fines and penalties
These sanctions primarily affect the company, not automatically your personal loan, but they strengthen your position in any civil dispute.

3. Reporting to BSP (banks, digital banks, e-wallet-based lending)

If the loan is via a bank, digital bank, or BSP-supervised institution:

Steps:

File a complaint with the bank first:
- Use official customer service channels.
- Cite:
  - Excessive interest or unexplained fees
  - Misleading advertisements
  - Failure to disclose effective interest
- Ask for a written response and re-computation of the loan.
If unresolved, escalate to BSP:
- Provide:
  - Copy of your complaint to the bank and its reply
  - Contracts and agreements
  - Proof of charges and effective interest rate
- BSP will handle it through its Consumer Assistance Mechanism and may require the bank to justify its practices or correct violations.

BSP can:

Order banks to refund or adjust charges in specific cases
Impose sanctions on supervised institutions
Require banks to improve their disclosure and complaint handling processes

4. Reporting to DTI (for retail credit and unfair trade practices)

For installment sales or retail-based credit (e.g., appliance stores, gadget shops):

You can complain to DTI under the Consumer Act for:
- Deceptive promotion of “0% interest” that hides charges
- Unfair contract terms
- Misrepresentation of financing costs

DTI can:

Mediate disputes
Order corrections
Impose administrative penalties for unfair trade practices

5. Reporting data privacy abuses to the NPC

If the app:

Accessed your contacts, photos or files without proper consent
Used your contacts to send shaming messages
Kept and processed your data beyond what is necessary or lawful

You may file a complaint with the National Privacy Commission (NPC) for violations of the Data Privacy Act.

Elements of a privacy complaint:

Identity of the lender/app
Specific data collected (contacts, photos, ID, etc.)
How it was misused or over-collected
Evidence (screenshots, messages to your contacts)
Steps you took to ask the company to stop or delete your data

NPC can:

Order the company to cease unlawful processing
Impose fines and corrective measures
Recommend criminal charges in severe cases

6. Criminal complaints: PNP / NBI

If the conduct involves:

Grave threats (e.g., threats of physical harm)
Extortion (“Pay this amount or we will file false cases/post your nude photos”)
Defamation or cyber libel
Coercion (forcing payment by illegal means)
Intrusion into bank accounts or systems (possible cybercrimes)

You may:

Report to the PNP (particularly the Anti-Cybercrime Group) or the NBI
File complaints for:
- Violation of the Cybercrime Prevention Act
- Crimes under the Revised Penal Code (threats, coercion, libel, extortion, etc.)

Always bring your documented evidence. For complex or serious cases, consult a lawyer to frame your complaint properly.

VII. Legal Remedies for Borrowers Beyond Reporting

Regulatory complaints punish or regulate the lender, but you may also seek remedies for your own loan.

1. Civil actions to challenge excessive interest

In a civil case, a borrower may:

Ask the court to:
- Declare the interest stipulation void for being unconscionable
- Reduce the interest to a reasonable rate (often 6% per annum)
- Recompute the balance due
Claim damages for:
- Harassment
- Mental anguish, anxiety
- Damage to reputation and employment
Ask for injunctive relief against continued harassment and shaming

2. Defense in collection suits and small claims

If the lender sues you (including via small claims):

You may acknowledge the principal loan but dispute the interest and charges as unconscionable.
Courts can:
- Delete the abusive interest and penalties
- Allow payment of the principal plus reasonable interest only

In small claims court, you don’t need a lawyer (up to the current jurisdictional amount), but legal advice is still very helpful in preparing your position.

3. Negotiated settlements

While regulators investigate, you may try to negotiate:

A restructured payment plan
Waiver or reduction of excessive interest, penalties, and fees
A written undertaking that harassment and privacy violations will stop

Get agreements in writing.

VIII. Special Issues in Online Lending Apps

Contact list scraping and “shaming”

Many apps demand access to your contact list as “permission”.
Even with consent, they must follow Data Privacy Act principles:
- Transparency
- Legitimate purpose
- Proportionality
Mass texting of your contacts for the purpose of public shaming is strongly arguable as unlawful data processing and may also violate criminal laws (e.g., grave threats, libel, unjust vexation).

Short-term loans with rollover

7–14 day loans with huge “processing fees” and daily penalties easily reach triple-digit annual interest.
Borrowers often roll over or re-borrow just to pay previous loans, creating a debt trap.
Such patterns strongly support complaints that the product design is predatory.

Access to your phone or social media accounts

Any attempt to:
- Take over your Facebook, email or e-wallet
- Use your login to embarrass or extort you may be both a data privacy violation and a cybercrime.

Fake legal threats

Threats like:
- “We will send sheriffs tomorrow to seize your property”
- “We will have you arrested immediately if you don’t pay today”
These are often false or misleading and can be:
- Unfair collection practice
- Possible criminal coercion or threats

IX. Practical Tips & Reminders

Do not panic, and do not overpay just because of threats.
- Many threats are bluffs designed to scare you into paying more than you actually owe.
Secure evidence before uninstalling the app or changing numbers.
- Take screenshots and backup copies first.
Complain in writing and keep copies.
- It shows regulators you tried to resolve the issue directly.
Verify whether the lender is registered.
- A registered lender can still be abusive, but an unregistered one is on even weaker legal ground.
Be careful of “loan fixers” or scammers who promise to erase your debt.
- Do not send money to strangers who claim they can “block” or “delete” your loans.
Seek legal help where possible.
- For low-income borrowers, consider:
  - Public Attorney’s Office (PAO)
  - Integrated Bar of the Philippines (IBP) Legal Aid
  - University legal aid clinics

Final Note

Reporting excessive interest and abusive practices in online lending is both a personal remedy and a public service. The more borrowers document and report predatory behavior, the easier it is for regulators and courts to crack down on abusive lenders and for fair, transparent financial services to grow.

If you’re dealing with a specific situation, your next best step is to:

Gather and organize your evidence.
Determine the correct regulator (SEC, BSP, DTI, NPC, etc.).
File a formal complaint, then consider civil and criminal remedies with the help of a lawyer or legal aid office.