Illegal Interest Rates and Threats by Online Lending Apps in the Philippines: Legal Remedies

This guide is for information only and isn’t a substitute for advice from your own lawyer.

1) The Legal Landscape (Philippine context)

a) Interest rate caps (or the lack of them).

The Usury Law (Act No. 2655) once set ceilings, but these were suspended by Central Bank Circular No. 905 (1982). There is no general statutory cap today.
Still, courts strike down “unconscionable” interest and penalty charges under the Civil Code (Arts. 19, 20, 21, 1229, 2227, 1306). The Supreme Court has repeatedly reduced or voided steep rates (e.g., multi-percent per month or compounding penalties) and recomputed loans on equitable terms.
If no valid interest stipulation remains, “legal interest” applies at 6% per annum (per Nacar v. Gallery Frames, 2013), generally from default or judicial demand.

b) Who regulates what.

SEC (Securities and Exchange Commission): Lending companies (RA 9474) and financing companies (RA 8556), including those operating online lending platforms (OLPs) that are not banks. SEC requires corporate registration, licensing, disclosure, and compliance with anti-harassment rules for collections.
BSP (Bangko Sentral ng Pilipinas): Banks, thrift/rural banks, EMI/wallets, and other BSP-supervised financial institutions. BSP issues consumer protection/collection standards and product-specific caps (e.g., credit cards), which do not automatically apply to non-bank OLPs.
IC (Insurance Commission): Insurers, HMOs, pre-need entities.
CDA (Cooperative Development Authority): Cooperatives offering loans to members.
Financial Consumer Protection Act (FCPA, RA 11765, 2022): Cross-cutting law that prohibits abusive collection and unfair practices, requires fair disclosure, and empowers SEC/BSP/IC/CDA to sanction violators and order restitution.
Data Privacy Act (DPA, RA 10173): Prohibits unlawful processing and disclosure of personal data (e.g., scraping your contact list, doxxing, mass-messaging your friends/employer). You can demand erasure, restriction, and file a complaint with the National Privacy Commission (NPC).
Cybercrime Prevention Act (RA 10175): “Shaming” and false statements online may be cyber libel; threats made electronically can aggravate liability.
Revised Penal Code (RPC):
- Grave/Light Threats (Arts. 282–283), Grave Coercion (Art. 286), Unjust Vexation/Other Coercions (Art. 287), Libel/Slander (Arts. 353–355), among others, may apply to harassing collection tactics.
Consumer Act (RA 7394): Bans deceptive or unfair acts; historically applied to goods/services but used to argue against grossly one-sided consumer credit practices.

Bottom line: There’s no universal cap, but unconscionable rates/fees and harassment are unlawful and punishable through civil, criminal, administrative, and privacy remedies.

2) What Counts as “Illegal” or Actionable

A. Interest & charges

Sky-high monthly rates (especially when compounded), stacked penalties (e.g., another X% per day/week on top of interest), hidden fees, and “rollovers” that balloon the balance.
Interest on interest (anatocism) without a clear, lawful stipulation.
One-sided clauses (e.g., unilateral changes, oppressive forum selection, confessions of judgment) may be struck down.

B. Collection threats & shaming

Threats of violence, arrest, or criminal cases for mere non-payment (debt default alone is civil, not criminal; estafa requires fraud/deceit at the start; B.P. 22 needs a bounced check).
Doxxing/shaming: Posting your photo, ID, or debt status on social media or messaging your contacts/employer to pressure you.
Obscene/insulting language, repeated calls, or contacting you at clearly unreasonable times.
Scraping your phonebook, GPS, photos, or gallery without valid consent or beyond stated purpose (often a DPA violation).

C. Unlicensed operations

OLPs that are not registered or use a shell “partner” to skirt regulation. Operating without the proper license is unlawful and voids the premise of many threatened actions.

3) Immediate Steps If You’re Being Harassed

Preserve evidence (lawfully).
- Keep messages, screenshots, caller IDs, call logs, payment proofs, contracts/terms, app permissions, and privacy notices.
- Don’t secretly record voice calls without consent (the Anti-Wiretapping Act, RA 4200 is strict). If you do record, get explicit consent on the call.
Lock down data.
- Remove the app’s permissions (contacts, SMS, storage, camera, location). Change passwords for email, socials, and bank/e-wallets.
- Send a Data Privacy Request to the lender (see template below): demand access, source of your data, specific recipients messaged, and erasure/cease-processing for non-necessary data.
Stop the bleeding financially.
- Write the lender to dispute unconscionable interest/fees and offer a reasonable plan (e.g., principal + fair interest). Pay by traceable channels only.
Tell third parties (if they were contacted).
- Advise HR/friends that debt collectors cannot lawfully demand their cooperation or disclose your debt to shame you. Ask them to keep any messages as evidence.

4) Your Remedies (Choose any that fit)

A) Administrative & Regulatory Complaints

SEC (for non-bank OLPs):
- Violations: unlicensed lending, unfair or abusive debt collection, deceptive advertising, non-disclosure.
- Relief: fines, cease-and-desist orders, license suspension/revocation, orders to stop harassment and correct disclosures.
- What to submit: identity and contact info, screenshots/recordings (with consent), contract/terms, ledger, computation, proof of payments, the specific numbers/accounts they used to contact you or your contacts.
NPC under the DPA:
- Violations: scraping/using your contact list, messaging third parties, excessive data collection, failure to honor erasure/objection requests, insecure processing.
- Relief: compliance orders, erasure/cease-processing, administrative penalties, and recommendations to regulators/prosecutors.
BSP/IC/CDA:
- If the collector is bank/EMI/insurer/co-op, file with the proper regulator under the FCPA.

(Tip: You can pursue both SEC and NPC tracks when the lender is a non-bank OLP engaging in privacy abuses.)

B) Criminal Remedies (RPC / Cybercrime)

Grave threats / light threats / grave coercion / unjust vexation for intimidation/harassment.
Libel/slander/cyber libel for public shaming or false statements; include URLs, posts, handles, and screenshots with timestamps.
B.P. 22/Estafa are separate crimes and should not be threatened against you unless their elements are truly present.
File with the City/Provincial Prosecutor (or NBI/PNP anti-cybercrime for e-evidence gathering).

C) Civil Actions (Courts)

Declare interest/penalties unconscionable, void/modify the stipulations, and recompute the debt (principal-based, simple interest at 6% p.a., and reasonable penalties if any).
Damages under Arts. 19/20/21 Civil Code (abuse of rights, acts contrary to law/good customs), plus attorney’s fees and costs.
Seek injunctive relief (temporary restraining order / preliminary injunction) to stop harassment/shaming.
For modest amounts, consider Small Claims (streamlined, no lawyers required for appearance; check current thresholds and rules).

D) Special Constitutional Remedies

Writ of Habeas Data (A.M. No. 08-1-16-SC): If your privacy is violated or threatened by data collection/disclosure, you may ask the court to order the deletion, destruction, or correction of your personal data and cease harassment.

5) How Courts Recompute the Loan (Typical Pattern)

Start with the principal actually received.
Strike or reduce unconscionable interest/penalties.
If interest is voided or not proved, apply 6% p.a. simple interest from default (or judicial demand), per Nacar.
No interest-on-interest unless a valid stipulation exists (and even then, courts often curb it).
Penalties/liquidated damages may be reduced if iniquitous (Civil Code Arts. 1229, 2227).
Compute interest on the total judgment at 6% p.a. from finality until full satisfaction.

Practical note: Even when you owe, huge daily/weekly add-ons rarely survive intact.

6) Defending Yourself If the Lender Sues

Affirmative defenses: Unlicensed lender; defective or unreadable e-contract; lack of proof of funds actually released; unconscionable interest/fees; unlawful data practices tainting the collection.
Demand strict proof: Show the ledger, disbursement, exact computation method, interest/penalty basis, and proof of notices.
Consignation/Good faith: If you tendered a fair amount (principal + reasonable interest) and they refused, document it.
No criminal liability for civil default (absent deceit/bounced check). Threats of arrest for mere debt are bluffs.

7) Evidence Pack (What to Collect)

IDs, contract/terms, screenshots of app pages (permissions, rates, fee tables).
Messages/calls (dates, numbers/handles), with consent for any audio.
Payment receipts, e-wallet/bank statements, transaction IDs.
Copies of complaints/letters to SEC, NPC, BSP, NBI/PNP, and any replies.
Names/positions of callers, dates/times, and what was said.

8) Practical Do’s and Don’ts

Do communicate in writing. Keep responses short, factual, and calm.
Do offer a reasonable repayment plan you can actually meet.
Do not give new personal data (work ID, selfies, contact list) just to stop harassment.
Do not pay via private accounts with no receipts.
Do tell your HR/contacts to preserve messages they receive and not to engage.

9) Templates (copy-paste and edit)

A) Data Privacy Cease-and-Desist / Erasure Request

Subject: Data Privacy Request: Cease Processing and Erasure

[Date]

[Company Name / Online Lending App]
[Address / Email]

I am [Full Name], borrower under Account/Reference No. [____]. I withdraw any consent to process my personal data beyond what is necessary to adjudicate my account and demand that you:

1) Cease all processing and disclosure of my personal data for harassment or public shaming, including messaging my contacts/employer.
2) Erase all copies of data harvested from my device (e.g., contact list, photos, GPS/SMS) and confirm in writing within 10 days.
3) Provide: (a) the personal data you hold about me, (b) sources of that data, (c) third parties to whom you disclosed it, (d) your retention period, and (e) measures to secure my data.

Your prior messages/calls violated the Data Privacy Act (RA 10173) and related regulations. Absent prompt compliance, I will file complaints with the NPC and SEC and pursue civil/criminal remedies.

Sincerely,
[Name]
[Mobile/Email]

B) Dispute of Unconscionable Interest / Offer to Pay

Subject: Dispute of Charges and Good-Faith Offer

[Date]

[Company Name]
[Address / Email]

I dispute the interest and penalty rates imposed on my loan (Ref. [____]) as unconscionable and contrary to the Civil Code and jurisprudence. I offer to settle the obligation at the principal actually received plus reasonable interest at 6% p.a. from default, less payments made, payable in [__] installments.

Please send a detailed Statement of Account (principal, dates, rates, fees, penalties) and the computation basis within 5 days. Pending resolution, cease any harassment or disclosure to third parties.

Sincerely,
[Name]

C) Complaint Snapshot (SEC / NPC / Prosecutor)

Who: Your full name and contacts; the company’s legal name, app name(s), numbers, pages/handles.
What: Specific acts (e.g., “messaged 34 contacts on [date] saying I’m a criminal”), attach screenshots.
When/Where/How: Dates, channels, URLs; identify unlicensed operations if applicable.
Relief sought: Stop harassment; delete data; recompute debt; sanction or prosecute.

10) Frequently Asked Questions

Q1: Can I be jailed for not paying an online loan? No—mere non-payment is civil, not criminal. Arrest requires a criminal case and a warrant. Beware of hollow threats.

Q2: They said they’ll file “estafa.” Estafa needs fraud at the start (e.g., using fake identity to obtain the loan). A simple inability to pay is not estafa.

Q3: They contacted my boss and sent my selfie/ID. Likely a DPA violation and unfair collection. Use the privacy request and file with NPC (and SEC if non-bank).

Q4: The app’s rate is “per day.” Is that allowed? Rates per se aren’t capped, but courts can void/reduce them when they are excessive or penal in nature, especially when compounded or stacked with fees.

Q5: Can they add “interest on interest”? Generally disfavored. Without a valid and reasonable stipulation, courts remove or reduce it.

Q6: Should I pay something now? If you owe principal, a good-faith partial payment matched with a written dispute and computation request is often strategic—while you pursue remedies.

11) One-Page Action Plan (TL;DR)

Secure evidence (no secret audio).
Send: (a) privacy cease-and-desist; (b) dispute/offer letter.
Complain to the correct regulator (SEC for OLPs; NPC for privacy abuses; BSP/IC/CDA if applicable).
Consider criminal complaints for threats/libel/coercion.
If sued, attack the rates/penalties, demand strict proof, and seek recomputation at 6% p.a.
Ask court for injunction or Habeas Data if harassment/shaming continues.

If you want, tell me the app’s exact name, your contract snippets, and a rough timeline/payments; I can draft a tailored computation and letter set.