How to Report Unfair Lending Practices and Harassment by Loan Apps in the Philippines

Introduction

In the digital age, loan applications (commonly referred to as "loan apps") have become a convenient source of quick financing for many Filipinos. These platforms, often operating through mobile applications, promise fast approvals and disbursements without the traditional paperwork associated with banks. However, the rise of these services has also led to widespread complaints about unfair lending practices and aggressive debt collection tactics, including harassment. Such issues violate Philippine laws designed to protect consumers and borrowers.

This article provides a comprehensive guide on identifying unfair lending practices and harassment by loan apps, the relevant legal frameworks in the Philippines, and the step-by-step process for reporting these violations. It draws from key statutes such as the Truth in Lending Act (Republic Act No. 3765), the Consumer Act of the Philippines (Republic Act No. 7394), the Data Privacy Act of 2012 (Republic Act No. 10173), and regulations issued by the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission (SEC), and other government bodies. By understanding these protections, borrowers can assert their rights and seek redress against abusive lenders.

Understanding Unfair Lending Practices

Unfair lending practices refer to deceptive, exploitative, or non-transparent actions by lenders that disadvantage borrowers. In the context of loan apps in the Philippines, these practices often exploit the urgency of borrowers needing quick cash, leading to financial traps.

Key Examples of Unfair Practices

Non-Disclosure or Misrepresentation of Terms: Lenders must fully disclose interest rates, fees, penalties, and total repayment amounts before the loan is granted. Failure to do so violates the Truth in Lending Act (RA 3765), which requires lenders to provide a clear statement of the finance charge expressed in pesos and centavos, the annual percentage rate, and the total amount to be financed.
Usurious Interest Rates: While the Usury Law (Act No. 2655) was suspended in 1982 by Central Bank Circular No. 905, allowing market-determined rates, excessive rates (e.g., daily interest compounding to over 100% annually) can still be deemed unconscionable under the Civil Code (Articles 1306 and 1409). The Supreme Court has ruled in cases like Medel v. Court of Appeals (G.R. No. 131622, 1998) that rates exceeding 5.5% per month may be voided.
Hidden Fees and Charges: Unauthorized processing fees, insurance premiums bundled without consent, or automatic deductions for "service charges" not clearly stated.
Predatory Lending Tactics: Targeting vulnerable groups like low-income earners with loans they cannot reasonably repay, leading to debt cycles. This may infringe on the Consumer Protection provisions under RA 7394.
Unauthorized Access to Personal Data: Many loan apps require access to contacts, messages, and location data. Using this for purposes beyond credit assessment, such as sharing with third parties without consent, breaches the Data Privacy Act.

Loan apps must be registered as lending or financing companies with the SEC under Republic Act No. 9474 (Lending Company Regulation Act of 2007) or as non-bank financial institutions with the BSP if they engage in quasi-banking activities. Unregistered apps operating illegally can be reported as scams.

Identifying Harassment in Debt Collection

Harassment occurs when lenders or their agents employ coercive, intimidating, or privacy-invading methods to collect debts. Philippine law strictly regulates collection practices to prevent abuse.

Forms of Harassment

Verbal or Written Threats: Threats of physical harm, legal action without basis, or public shaming (e.g., posting debt details on social media). This violates Article 19 of the Civil Code (abuse of rights) and may constitute grave threats under the Revised Penal Code (Article 282).
Contacting Third Parties: Reaching out to family, friends, employers, or contacts from the borrower's phone to disclose debt information, often called "contact blasting." This infringes on the Data Privacy Act, as it involves unauthorized processing of personal data.
Frequent or Untimely Communications: Calling or messaging at unreasonable hours (e.g., midnight) or excessively (dozens of times a day), which can be seen as alarm and scandal under the Revised Penal Code (Article 155) or cyber harassment under Republic Act No. 10175 (Cybercrime Prevention Act of 2012).
Public Humiliation: Posting photos or details of borrowers on "shame lists" online or in public forums, potentially liable for libel (Article 353, Revised Penal Code) or violation of RA 10173.
Impersonation or Deception: Collectors posing as law enforcement or government officials to intimidate borrowers.

The BSP's Circular No. 454 (2004) and SEC Memorandum Circular No. 18 (2019) prohibit unfair collection practices by financial institutions and lending companies, including the use of violence, threats, or public disclosure of debts.

Legal Framework Protecting Borrowers

Several laws and regulations form the backbone of borrower protection in the Philippines:

Truth in Lending Act (RA 3765): Mandates full disclosure of loan terms to prevent deception.
Consumer Act of the Philippines (RA 7394): Protects against deceptive sales acts, including in financing.
Lending Company Regulation Act (RA 9474): Requires registration and regulates operations of lending firms.
Data Privacy Act (RA 10173): Governed by the National Privacy Commission (NPC), it safeguards personal information and allows complaints for data breaches.
Cybercrime Prevention Act (RA 10175): Addresses online harassment and unauthorized access.
Civil Code and Revised Penal Code: Provide civil remedies (damages) and criminal penalties for abuses.
BSP and SEC Regulations: The BSP oversees banks and non-bank lenders, while the SEC handles financing companies. Both have issued guidelines on fair debt collection, such as BSP Circular No. 1133 (2021) on consumer protection in digital financial services.

In 2022, the BSP and SEC intensified crackdowns on unregistered online lenders, blacklisting hundreds of apps for violations.

Steps to Report Unfair Lending Practices and Harassment

Reporting is crucial to stop abusive practices and potentially recover damages. Borrowers should document everything: screenshots of app interfaces, loan agreements, communications, and evidence of payments or harassment.

Step 1: Gather Evidence

Save loan contracts, terms and conditions, and disclosure statements.
Record dates, times, and content of harassing calls/messages.
Note app details: name, developer, registration status (check SEC or BSP websites if possible).
If data privacy is involved, document unauthorized data use.

Step 2: Attempt Informal Resolution

Contact the lender directly via their customer service to dispute charges or stop harassment. Demand a written response.
If unresolved, escalate to formal reporting.

Step 3: File Complaints with Relevant Agencies

Multiple agencies handle complaints based on the violation:

Bangko Sentral ng Pilipinas (BSP): For complaints against banks, quasi-banks, or digital lenders under BSP supervision.
- File via BSP Consumer Assistance Mechanism (CAM): Email at consumeraffairs@bsp.gov.ph or call (02) 8708-7087.
- Online portal: BSP website's Consumer Assistance section.
- Required: Complaint form, evidence, and borrower details.
Securities and Exchange Commission (SEC): For lending and financing companies.
- File at the SEC Enforcement and Investor Protection Department (EIPD).
- Email: eipd@sec.gov.ph or use the SEC i-Report portal.
- SEC can revoke licenses and impose fines up to PHP 1 million per violation under RA 9474.
National Privacy Commission (NPC): For data privacy breaches and harassment involving personal data.
- File a Privacy Complaint via npcprivacycomplaints@privacy.gov.ph or the NPC website.
- Penalties include fines up to PHP 5 million and imprisonment.
Department of Trade and Industry (DTI): For consumer protection issues under RA 7394.
- File via DTI's Fair Trade Enforcement Bureau: Email at fteb@dti.gov.ph or call 1-DTI (1-384).
- Handles deceptive practices and can mediate disputes.
Philippine National Police (PNP) or National Bureau of Investigation (NBI): For criminal aspects like threats, cybercrimes, or scams.
- Report to PNP Anti-Cybercrime Group (ACG): Hotline 16677 or email acg@pnp.gov.ph.
- NBI Cybercrime Division: cybercrime@nbi.gov.ph.
- File a blotter report at the nearest police station for harassment.
Integrated Bar of the Philippines (IBP) or Public Attorney's Office (PAO): For free legal aid if pursuing civil or criminal cases. Indigent borrowers qualify for PAO services.

Step 4: Pursue Legal Remedies

Civil Action: Sue for damages under the Civil Code for moral, exemplary, or actual damages. File in Regional Trial Court or Metropolitan Trial Court depending on amount.
Criminal Prosecution: For violations like estafa (Article 315, Revised Penal Code) if fraud is involved, or cyber libel.
Class Action: If multiple borrowers are affected, a class suit may be filed.
Injunctions: Seek court orders to stop harassment.

Potential Outcomes and Remedies

Administrative Sanctions: Agencies like BSP and SEC can suspend operations, fine lenders, or blacklist apps.
Refunds and Loan Adjustments: Courts or agencies may order refunds of excessive fees or void unconscionable terms.
Criminal Penalties: Imprisonment and fines for harassers.
Data Deletion: NPC can order the destruction of misused data.
In high-profile cases, like the 2023 crackdown on apps like "Cash Loan" and "Fast Peso," authorities shut down operations and arrested executives.

Prevention Tips for Borrowers

To avoid issues:

Verify lender registration on SEC or BSP websites.
Read terms carefully; use apps with clear disclosures.
Borrow only what you can repay.
Report suspicious apps immediately.
Use privacy settings to limit app access.

Conclusion

Unfair lending practices and harassment by loan apps undermine financial inclusion and consumer rights in the Philippines. By leveraging the robust legal framework and reporting mechanisms, borrowers can hold lenders accountable and contribute to a safer digital lending environment. Prompt action not only resolves individual grievances but also deters widespread abuses, fostering ethical practices in the industry. If facing such issues, consult legal professionals for personalized advice.