In the Philippine legal landscape, the relationship between creditors and debtors is governed by a mix of civil laws, central bank regulations, and consumer protection statutes. While the country moved toward a deregulated interest rate environment decades ago, recent jurisprudence and regulatory updates have re-established "ceilings" on what is considered legally permissible and ethically acceptable.

I. Legal Limits on Interest Rates

The primary rule regarding interest rates in the Philippines is found in Central Bank Circular No. 905 (1982), which effectively suspended the Usury Law. This led to the common misconception that lenders can charge any rate they wish. However, the Philippine Supreme Court has consistently intervened to protect borrowers.

1. The Principle of "Unconscionable" Rates

Even if a borrower signs a contract agreeing to a high interest rate, the Supreme Court has the power to reduce it if it is found to be "excessive, iniquitous, unconscionable, and exorbitant."

Standard Jurisprudence: Rates of 3% per month (36% per annum) or higher are frequently struck down by the courts and reduced to the prevailing legal rate (currently 6% per annum for loans or forbearances of money when the stipulated rate is voided).
Compounding Interest: Interest on interest is only allowed if there is an express written agreement between the parties (Article 2212, Civil Code).

2. Credit Card Interest Caps

To alleviate the financial burden on consumers, the Bangko Sentral ng Pilipinas (BSP) issued Circular No. 1100, which took effect in late 2020:

Interest/Finance Charge: Capped at 3% per month (36% per year).
Monthly Add-on Rate (Installments): Capped at 1% per month.
Late Payment Fees: Capped at ₱200 per month.

II. Unfair Debt Collection Practices

While creditors have the right to collect what is owed, the law prohibits "dirty" collection tactics. Debt collection agencies and banks are strictly monitored by the BSP and the Securities and Exchange Commission (SEC).

1. Prohibited Acts

Under BSP Circular No. 454 and SEC Memorandum Circular No. 18 (Series of 2019), the following actions constitute unfair debt collection:

Threats of Violence: Using or threatening to use physical violence or other criminal means to harm a person, their reputation, or property.
Obscene Language: Using profanity or abusive language to insult the debtor.
Disclosure of Information: Threatening to publish the names of debtors or sharing debt information with third parties (including employers or social media) without consent.
Misrepresentation: Falsely claiming to be a lawyer, a court official, or a government agent.
Harassment: Making phone calls at unreasonable hours (generally before 6:00 AM or after 10:00 PM), unless the debtor has given permission.

2. The "Shaming" Prohibition

The Data Privacy Act of 2012 (RA 10173) plays a crucial role here. Debt collectors are prohibited from accessing a borrower’s contact list or "shaming" them on social media. The National Privacy Commission (NPC) has actively prosecuted online lending apps (OLAs) for these violations.

III. Legal Remedies for Debtors

If a debtor is subjected to unconscionable interest rates or harassment, several legal avenues are available:

Issue	Action/Remedy
Excessive Interest	Petition the court to declare the interest rate void for being unconscionable. The debt remains, but the interest is usually reduced to 6% per annum.
Harassment/Threats	File a formal complaint with the SEC (for lending companies) or the BSP (for banks).
Data Privacy Violations	File a complaint with the National Privacy Commission (NPC) if personal data was used to shame or harass.
Criminal Acts	File charges for Grave Coercion, Unjust Vexation, or Libel under the Revised Penal Code.

IV. Summary of Key Statutes

Civil Code of the Philippines: Articles 1229 and 2227 (Equity and Fairness in Contracts).
Republic Act No. 3765 (Truth in Lending Act): Requires creditors to provide a full, written disclosure of the finance charge and the "effective" annual interest rate before the transaction.
Republic Act No. 10870 (Philippine Credit Card Industry Regulation Law): Specifically governs the conduct of credit card issuers.
SEC MC No. 18, s. 2019: Provides the specific "Prohibition on Unfair Debt Collection Practices" for financing and lending companies.