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

Introduction

The proliferation of online lending applications (loan apps) in the Philippines has provided convenient access to credit for many Filipinos, particularly those underserved by traditional banks. However, this convenience has been marred by widespread reports of unfair lending practices and harassment tactics employed by some operators. Unfair lending practices may include exorbitant interest rates, undisclosed fees, deceptive advertising, and coercive collection methods. Harassment often manifests as incessant calls, threatening messages, public shaming on social media, or unauthorized access to borrowers' contacts and personal data.

Under Philippine law, these actions are not only unethical but often illegal, violating consumer protection statutes, data privacy regulations, and anti-harassment provisions. This article provides a comprehensive guide on identifying such practices, the legal framework governing them, and step-by-step procedures for reporting and seeking redress. It draws from key Philippine laws, including the Lending Company Regulation Act of 2007 (Republic Act No. 9474), the Data Privacy Act of 2012 (Republic Act No. 10173), the Consumer Act of the Philippines (Republic Act No. 7394), and relevant circulars from regulatory bodies like the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP).

Understanding Unfair Lending Practices

Unfair lending practices refer to any exploitative or deceptive conduct by lenders that disadvantages borrowers. In the context of loan apps, common issues include:

Excessive Interest Rates and Fees: The Truth in Lending Act (Republic Act No. 3765) requires full disclosure of all charges, including interest rates, processing fees, and penalties. Loan apps charging rates far beyond the legal caps—such as those exceeding the usury limits under the Civil Code (typically around 6-12% per annum for unsecured loans, though higher for certain micro-lending)—are engaging in unfair practices. The SEC has set guidelines limiting effective interest rates for fintech lending to reasonable levels, often not exceeding 0.8% per day for short-term loans.
Deceptive Advertising and Non-Disclosure: Misrepresenting loan terms, such as hiding penalties for late payments or automatic rollovers, violates the Consumer Act. Borrowers must receive clear, written disclosures before agreeing to terms.
Predatory Lending: Targeting vulnerable groups (e.g., low-income earners) with loans they cannot afford, leading to debt traps. This may involve aggressive upselling or repeated lending without proper credit assessment.
Unauthorized Deductions: Deducting payments from bank accounts or e-wallets without explicit consent breaches banking regulations under BSP oversight.

Regulatory bodies have noted a surge in complaints since the COVID-19 pandemic, with the SEC revoking certificates of authority for numerous errant lending companies.

Identifying Harassment by Loan Apps

Harassment in debt collection is strictly prohibited under Philippine law. Common forms include:

Verbal and Psychological Abuse: Threatening calls or messages implying violence, arrest, or harm to family members. This violates Article 285 of the Revised Penal Code on unjust vexation and may fall under Republic Act No. 9262 (Anti-Violence Against Women and Their Children Act) if gender-based.
Public Shaming: Posting borrowers' details on social media or contacting employers, friends, and family to embarrass them. This is a clear violation of the Data Privacy Act, as it involves unauthorized processing of personal information.
Cyber Harassment: Using apps to access device contacts, photos, or location data without consent, often as collateral. The Cybercrime Prevention Act of 2012 (Republic Act No. 10175) addresses unauthorized access and online threats.
Excessive Contact: Bombarding borrowers with calls or messages at unreasonable hours, which contravenes SEC Memorandum Circular No. 18, Series of 2019, on fair debt collection practices for financing and lending companies.

Victims often experience anxiety, depression, and social stigma, prompting authorities to treat these as serious offenses.

Legal Framework and Protections

Philippine laws provide robust protections against these abuses:

Securities and Exchange Commission (SEC): Regulates lending companies under RA 9474. SEC Circular No. 10, Series of 2020, mandates fair practices for online lending platforms (OLPs) and prohibits harassment. The SEC can impose fines, suspend operations, or revoke registrations.
Bangko Sentral ng Pilipinas (BSP): Oversees banks and non-bank financial institutions. BSP Circular No. 941 regulates interest rates and requires ethical collection practices.
National Privacy Commission (NPC): Enforces the Data Privacy Act. Loan apps must obtain consent for data collection and cannot share information without authorization. Violations can lead to administrative fines up to PHP 5 million or criminal charges.
Department of Trade and Industry (DTI): Handles consumer complaints under the Consumer Act, including deceptive sales practices.
Philippine National Police (PNP) and National Bureau of Investigation (NBI): Investigate criminal aspects, such as threats or cybercrimes.
Other Laws: The Anti-Bullying Act (for youth victims), the Safe Spaces Act (Republic Act No. 11313) for gender-based online harassment, and general civil remedies under the Civil Code for damages.

In 2023, the SEC blacklisted over 2,000 unauthorized loan apps, and joint operations with the NPC have led to shutdowns of rogue operators.

Step-by-Step Guide to Reporting

Reporting is crucial to stop the abuse and potentially recover damages. Follow these steps systematically:

1. Gather Evidence

Collect all relevant documents: Loan agreements, payment receipts, app screenshots showing terms and conditions.
Document harassment: Save messages, call logs, emails, and social media posts. Note dates, times, and sender details.
Record interactions: Use screen recordings or voice memos for calls (with consent where required).
Preserve privacy breaches: Note any unauthorized data access or sharing.

Strong evidence strengthens your case and is required for formal complaints.

2. Attempt Internal Resolution

Contact the loan app's customer service via their app, email, or hotline to dispute charges or report harassment. Demand cessation of abusive practices and request adjustments (e.g., waive unfair fees).
If unresponsive, this step serves as proof of good faith for regulators.

3. File a Complaint with Regulatory Bodies

SEC: For unfair practices by registered lending companies. Submit via the SEC's online portal (sec.gov.ph) or email (enforcement@sec.gov.ph). Include the app's name, loan details, and evidence. The SEC investigates within 30-60 days and can order refunds or penalties.
NPC: For data privacy violations. File through the NPC's Complaints and Investigation Division (complaints@privacy.gov.ph) or online form. They can impose sanctions and refer criminal cases.
BSP: If the app is linked to a bank. Report via BSP's Consumer Assistance Mechanism (consumeraffairs@bsp.gov.ph).
DTI: For general consumer issues. Use the DTI's Fair Trade Enforcement Bureau (fteb@dti.gov.ph) or hotline (1-384).

These agencies offer free mediation and can resolve issues without court involvement.

4. Report Criminal Aspects

PNP Anti-Cybercrime Group (ACG): For online harassment or threats. File at the nearest PNP station or via their hotline (16677). Provide digital evidence for cybercrime investigations.
NBI Cybercrime Division: Handles complex cases involving fraud or data breaches. Submit complaints at NBI offices or online (nbi.gov.ph).
If physical threats are involved, file for alarms and scandals or grave threats under the Revised Penal Code at the local prosecutor's office.

5. Seek Legal Assistance and File Civil/Criminal Cases

Consult free legal aid: Public Attorney's Office (PAO) for indigent litigants, Integrated Bar of the Philippines (IBP), or NGOs like the Philippine Consumer Protection Council.
File a civil suit: In small claims court (for amounts up to PHP 400,000) for damages, refunds, or injunctions. Venue is the borrower's residence.
Pursue criminal charges: For violations like estafa (fraud) under Article 315 of the Revised Penal Code, or cyber libel if defamatory posts are involved.
Class actions: If multiple victims, coordinate for collective lawsuits, as seen in recent cases against notorious loan apps.

6. Additional Remedies and Support

Debt Counseling: Seek help from organizations like the Credit Information Corporation (CIC) or financial literacy programs by the BSP.
Blacklisting Apps: Report unauthorized apps to Google Play or Apple App Store for removal.
Mental Health Support: Harassment can cause trauma; access services via the Department of Health (DOH) or hotlines like Hopeline (0917-558-4673).
Preventive Measures: Before borrowing, verify the app's legitimacy on the SEC's list of registered OLPs. Read reviews and terms carefully.

Challenges and Tips for Success

Victims may face hurdles like fear of retaliation, lack of digital literacy, or jurisdictional issues (many apps operate offshore). To overcome:

Act promptly: Statutes of limitations apply (e.g., 4 years for civil fraud claims).
Anonymity: Some agencies allow anonymous reporting, but full details yield better results.
Documentation: Use secure storage for evidence to avoid tampering.
Awareness: Educate others through community groups to amplify pressure on regulators.

Success stories include the 2022 SEC crackdown on apps like Cashwagon and JuanHand, resulting in fines and operational halts.

Conclusion

Unfair lending practices and harassment by loan apps undermine financial inclusion and violate fundamental rights in the Philippines. By understanding your protections and following the reporting process, you can hold perpetrators accountable, recover losses, and contribute to a safer lending environment. If victimized, remember that support is available—do not suffer in silence. Regulatory reforms continue, with proposals for stricter licensing and real-time monitoring to curb these issues at the source.