I. Introduction

Applying for a personal loan in the Philippines is not just a business transaction; it is a legally regulated activity governed by the Constitution, statutes, regulations, and jurisprudence. Borrowers are not at the mercy of lenders: they are “financial consumers” with clearly recognized rights before, during, and after the loan application process.

This article focuses on the rights of borrowers at the application and pre-approval stage, but necessarily touches on some rights that continue throughout the life of the loan because they must already be disclosed or agreed upon when the loan is taken out.

II. Legal Framework

The main legal sources governing a borrower’s rights in personal loan applications include:

1987 Philippine Constitution
- Art. II: Policies on social justice and protection of consumers.
- Art. XVI, Sec. 9: State policy to protect consumers.
Civil Code of the Philippines
- General rules on obligations and contracts (consent, object, cause, validity, void and voidable contracts, unfair or unconscionable stipulations, etc.).
Truth in Lending Act (RA 3765)
- Requires lenders to disclose clearly and in writing the true cost of borrowing.
Consumer Act of the Philippines (RA 7394)
- Protects consumers against deceptive, unfair, and unconscionable sales practices, including in financial services.
Data Privacy Act of 2012 (RA 10173)
- Protects personal and sensitive personal information collected during loan applications.
Lending Company Regulation Act of 2007 (RA 9474) Financing Company Act (RA 8556)
- Regulate lending and financing companies (licensing, disclosure, prohibited practices).
Financial Products and Services Consumer Protection Act (RA 11765)
- A newer, comprehensive statute on financial consumer protection; covers banks, lending and financing companies, and other financial service providers (FSPs).
Credit Information System Act (RA 9510)
- Governs the centralized credit information system and rights over credit data.
Bangko Sentral ng Pilipinas (BSP) regulations
- For banks and BSP-supervised entities: rules on disclosure, fair lending, responsible pricing, and acceptable collection practices.
Securities and Exchange Commission (SEC) regulations
- For lending/financing companies, especially online lenders and loan apps.
National Privacy Commission (NPC) issuances
- Clarify what loan apps and lenders can and cannot do with personal data (contacts, photos, location, etc.).
Supreme Court jurisprudence
- On unconscionable interest rates, contract interpretation, and abusive terms.

III. Right to Apply for a Loan and Freedom from Unlawful Discrimination

There is no absolute “right to be approved” for a loan, but there are important protections:

Freedom of contract with limits
- Lenders generally decide whom to lend to and on what terms, but public policy and law prohibit terms or practices that are illegal, immoral, or grossly unconscionable.
Non-discrimination principles
- While the Philippines does not yet have a fully detailed “Equal Credit Opportunity” law like some other jurisdictions, discrimination based on sex, religion, race, etc. may conflict with constitutional principles and various special laws (e.g., women’s protections, labor and social justice rules).
- Government and regulated entities cannot adopt arbitrary or manifestly unreasonable criteria that would amount to a denial of equal protection.
Right to clear criteria (in practice)
- RA 11765 and regulatory guidelines encourage transparent credit assessment criteria, especially for mass-market loan products. Borrowers may ask:
  - What factors affect their eligibility?
  - Whether the lender uses credit scores, income thresholds, or specific documents.

Although lenders may lawfully decline an application, they cannot do so using reasons that are explicitly against public policy or discriminatory in a way forbidden by law.

IV. Right to Information and Disclosure of Loan Terms

At the heart of borrower protection are disclosure rights.

1. Truth in Lending Act (RA 3765)

Before or at the time a borrower becomes obligated on a loan, the lender must clearly and in writing disclose, among others:

The principal amount of the loan.
The finance charges (interest, service charges, commissions, etc.).
The total amount to be paid by the borrower.
The effective interest rate per annum and the method of computing it.
The payment schedule (number of payments, amounts, and due dates).
Any other charges to be imposed as a condition of the loan (processing, appraisal, notarial, insurance, penalties, etc.).

These must be provided in a manner that allows the borrower to understand and compare products and make an informed decision.

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

RA 11765 strengthens disclosure duties by requiring FSPs to:

Use plain and understandable language in contracts and marketing materials.
Provide key information sheets (KIS) or similar summaries that highlight:
- Effective interest rate;
- Fees and charges;
- Total cost of credit;
- Significant risks and obligations.
Avoid misleading omissions (i.e., failing to mention material charges, lock-in periods, balloon payments, or automatic renewals).

Lenders must ensure that sales staff, agents, and digital platforms do not downplay the full cost or hide crucial conditions.

3. Right to Receive a Copy of the Contract

Borrowers have the right to receive a written copy of:

The loan agreement or promissory note; and
Any supporting documents or schedules that define interest, charges, or collateral.

Under the Civil Code and general evidence rules, the borrower has a right to accessible documentation for enforcement and reference.

V. Right to Privacy and Data Protection in Loan Applications

Loan applications require personal data—identity, income, employment, bank accounts, even behavioral patterns (online lending apps). The Data Privacy Act (RA 10173) provides robust rights:

1. Lawful Processing and Consent

Personal information may only be collected and processed if:

There is a lawful basis (e.g., contract, legal obligation, legitimate interest); and
For many types of data—especially sensitive personal information (e.g., government IDs, financial information)—valid consent is required.

Valid consent must be:

Freely given (no coercion beyond what is reasonably necessary for the loan);
Specific and informed (the borrower is told why the data is needed and how it will be used);
Indicated by an appropriate act (signature, affirmative action, ticking a box—not default “opt-in”).

“Bundled” consent clauses that allow broad, vague use of personal data may be invalid or at least questionable.

2. Purpose Limitation and Data Minimization

Lenders may collect only data necessary and proportionate for:

Assessing creditworthiness;
Complying with legal/regulatory requirements (e.g., KYC, anti-money laundering).

They cannot justify scooping unnecessary data (e.g., full contact list, photo gallery, unrelated files) simply “because the app can access it.”

3. Rights of the Data Subject (Borrower)

Borrowers have, among others:

Right to be informed – about data collection, uses, and disclosures.
Right to access – to see what data is held about them.
Right to rectification – to correct incomplete or inaccurate data (e.g., wrong delinquency record).
Right to object – to certain processing activities (especially direct marketing or unnecessary processing).
Right to erasure or blocking – when processing is unlawful or no longer necessary.
Right to damages – if they suffer harm due to privacy violations (e.g., public shaming through misuse of contacts).

4. Restrictions on Access to Mobile Contacts and “Shaming” Practices

Online lending apps have been notorious for:

Accessing contacts, photos, and social media; and
Sending threatening or shaming messages to borrowers’ friends, colleagues, and family.

These practices generally violate the Data Privacy Act and related regulations. Borrowers have the right to:

Refuse installation of apps that demand excessive permissions;
Withdraw consent; and
File complaints with the National Privacy Commission and/or regulators.

VI. Right Against Deceptive and Unfair Marketing

Under the Consumer Act and RA 11765, borrowers are protected from:

Misleading advertisements and representations
- Ads that prominently display a very low “teaser” rate but hide much higher actual charges.
- “No hidden charges” claims when there are numerous undisclosed fees.
Unfair or unconscionable sales acts or practices
- Aggressive sales pressure on vulnerable borrowers (elderly, financially distressed, minimally literate) without adequate explanation of risks.
- Using complicated jargon to obscure the effective cost.

If the marketing or representations induced the borrower to sign a contract they would not have otherwise entered into, courts and regulators may:

Declare certain clauses unenforceable or void;
Order restitution or refunds; and/or
Impose administrative or criminal penalties on the lender or responsible officers.

VII. Right to Fair and Transparent Pricing

1. Interest Rates and Fees

Philippine usury ceilings have been suspended, but this does not mean lenders can charge anything they want. The Supreme Court has repeatedly held:

While parties may stipulate interest, courts may strike down or reduce rates that are excessive, iniquitous, unconscionable, or contrary to morals.
The same scrutiny applies to penalties, service fees, and other finance charges.

Borrowers have the right to:

Be informed of all charges upfront; and
Challenge unconscionable rates in court or before regulators.

2. Penalty Charges and Default Interest

Penalty clauses for late payment must also be:

Clearly disclosed;
Reasonable and proportionate.

Courts often reduce combined regular and penalty interest that results in an absurdly high effective rate.

3. Prohibition of Hidden Charges

Any of the following practices may be legally problematic:

Requiring the borrower to sign for a loan amount, then automatically deducting large “processing fees” such that the net proceeds are far smaller.
“Bundled” mandatory charges (e.g., insurance, membership fees) not properly disclosed and itemized.

Borrowers can insist that:

The net proceeds and full breakdown of deductions be clearly shown; and
No unauthorized debits are made from their bank accounts.

VIII. Rights in Credit Investigation and Credit Scoring

To evaluate a loan application, lenders conduct credit investigation (CI) and may use credit scores. Borrowers have rights relating to this process.

1. Consent and Transparency

Borrowers should be told:

That a CI will be conducted (calls to employer, landlord, references, etc.);
That credit bureau information may be accessed; and
What types of data will be examined.

Consent for CI is usually obtained via a clause in the application form. This clause must still comply with the Data Privacy Act.

2. Credit Information System Act (RA 9510)

Under RA 9510:

Credit data about borrowers may be compiled in a centralized credit information system, with reports accessible to accredited bureaus and lenders.
Borrowers have the right to:
- Access their credit report;
- Dispute inaccurate information; and
- Have corrected information disseminated to participants.

If a loan is denied based on incorrect credit information, the borrower may demand correction and may have grounds to claim damages if they suffered quantifiable loss.

IX. Right to Fair Contract Terms and Protection from Contracts of Adhesion

Loan contracts are typically standard-form or adhesion contracts: the lender drafts everything; the borrower simply signs or walks away.

Philippine law recognizes:

Contracts of adhesion are not per se void, but if:
- There are ambiguous clauses, they are interpreted against the drafter (the lender).
- Buried or unusual clauses may be deemed unenforceable if not adequately explained.
Prohibition of clauses that waive essential rights Clauses that attempt to:
- Completely waive all legal remedies;
- Waive statutory protections (e.g., rights under RA 11765 or the Data Privacy Act); or
- Allow the lender to act as “judge, jury, and executioner”
may be declared void as contrary to law or public policy.
Duty to explain key terms Especially when dealing with unsophisticated borrowers, lenders and their agents are expected to explain:
- Interest computation;
- Effects of default;
- Collateral and risk of foreclosure;
- Cross-default and acceleration clauses.

Failure to do so may support a claim of vitiated consent, fraud, or unconscionability.

X. Rights Relating to Digital / Online Loan Applications

Online personal loans and loan apps introduce specific issues:

1. Valid Electronic Consent and Contract

Under e-commerce and electronic transactions principles:

Electronic signatures and online acceptance can form valid contracts, as long as:
- The borrower is given accessible and readable contract terms before agreeing;
- There is a clear opportunity to review and download or print the terms.

Lenders must not hide the contract behind multiple links or obscure it in a way that makes real consent questionable.

2. App Permissions and Device Data

Borrowers can:

Refuse “all-access” permissions that are not necessary for processing the loan;
Question why an app needs access to contacts, messages, photos, or location merely to process a personal loan;
Lodge complaints if the app uses these permissions for harassment or unauthorized profiling.

3. Automated Decision-Making

Where lenders use automated underwriting systems or algorithms, borrowers have a legitimate interest in:

Knowing that automated tools are used;
Ensuring such tools are not biased or discriminatory;
Challenging decisions that appear to be based on erroneous data.

XI. Rights During Collection – Already Relevant at Application

Although collection happens after loan approval, the borrower’s rights here are so central that they should already be disclosed and understood when applying.

Borrowers have the right to fair collection practices, including:

No threats of physical harm, obscene language, or harassment;
No public shaming (e.g., posting on social media, group chats, or workplace bulletin boards);
Proper identification of collectors (name, company, and authority);
Reasonable times and manners of contacting borrowers.

Regulators have issued rules and circulars that treat harassment and shaming as:

Unfair or abusive conduct;
Possible violations of the Data Privacy Act;
Grounds for fines, suspension, or revocation of licenses.

Borrowers may ask, at application stage:

Who will collect if they default (in-house vs. third-party collectors);
Whether the lender assigns or sells receivables to collection agencies and what standards these agencies must follow.

XII. Right to Withdraw or Decline Before Perfection of the Contract

Before the loan contract is perfected (i.e., before there is a definite agreement on principal, interest, and conditions, and the lender has accepted), the borrower usually remains free to withdraw the application.

Once the loan is perfected and:

The borrower has signed the contract; and
The funds have been made available (or credited);

then ordinary contractual rules apply, and unilateral withdrawal may have consequences (e.g., cancellation fees, if lawful and disclosed).

Cooling-Off or Cancellation Rights

For certain financial products and in certain contexts (such as off-premises or distance selling, or where regulations create a cooling-off period), borrowers may have:

A short period to rescind without penalty; or
A right to prepay with limited or regulated fees.

The availability of such a right depends on the specific product and governing regulation; it is not automatic for all personal loans. Borrowers should ask explicitly if a cooling-off period exists.

XIII. Remedies and Enforcement Options

If a borrower’s rights are violated at the application stage, several remedies may be pursued:

1. Internal Complaint Handling

RA 11765 requires FSPs to implement internal dispute resolution (IDR) mechanisms. Borrowers may:

File a written complaint with the lender;
Demand a written response within a reasonable period;
Request escalation to higher management or a dedicated complaint unit.

Lenders must keep a record of complaints and handle them systematically.

2. Regulatory Complaints

Depending on the nature of the lender:

BSP – for banks and BSP-supervised financial institutions.
SEC – for lending and financing companies, especially online lenders.
Insurance Commission – if the loan is bundled with insurance products that are mis-sold.
DTI – for deceptive or unfair trade practices under the Consumer Act (for certain non-BSP, non-SEC entities).
National Privacy Commission – for violations of the Data Privacy Act (unauthorized access to contacts, harassment using personal data, data breaches, etc.).

Each regulator has complaint procedures; borrowers can seek:

Administrative sanctions against the lender;
Orders to cease abusive practices; and
Occasionally, restitution or corrective measures.

3. Court Actions

Borrowers may also go to court to:

Annul or reform contracts that are void, voidable, or contain illegal terms;
Reduce unconscionable interest or penalties;
Seek damages (actual, moral, exemplary) for abusive conduct or wrongful denial of rights.

For smaller monetary amounts, small claims courts provide a more accessible avenue, with simpler procedures and no need for a lawyer in many cases (within the applicable small-claims jurisdictional limits).

4. Criminal Liability

In extreme cases, lenders or their agents may incur criminal liability, for example:

Harassment or threats that amount to grave threats, grave coercion, or other crimes under the Revised Penal Code;
Operating as a lending company without proper registration or licensing, in violation of special laws;
Data privacy violations carrying criminal penalties.

XIV. Practical Steps Borrowers Should Take at the Application Stage

To actually enjoy these rights, borrowers should:

Read the key information sheet and contract carefully. Focus on:
- Effective annual interest rate;
- All fees and charges;
- Late payment penalties;
- Collateral or security;
- Default and acceleration clauses.
Ask for clarification in writing. If something is unclear, ask the lender to clarify via email or written form. This creates a record that can be used later.
Guard personal data.
- Be cautious about installing loan apps that request excessive permissions.
- Provide only data relevant to credit evaluation and legal compliance.
Check the lender’s registration and license.
- Confirm whether the lender is supervised by BSP, SEC, or another regulator.
- Avoid unregistered lenders or informal “5-6” arrangements when possible.
Keep copies of all documents and communications.
- Contracts, disclosure statements, text messages, emails, and app screenshots can all be essential evidence.
Complain early if something seems off.
- Start with the lender’s internal process;
- Escalate to regulators if unresolved;
- Consider legal advice if substantial amounts, harassment, or serious rights violations are involved.

XV. Conclusion

In the Philippine context, the process of applying for a personal loan is governed by a dense network of protections: laws on disclosure, consumer rights, data privacy, fair pricing, and responsible collection. Borrowers:

Have the right to know the true cost and terms of the loan;
Have the right to control their personal data and be free from harassment and shaming;
Have the right to fair, transparent, and non-abusive practices from application through repayment; and
Have multiple avenues for redress when these rights are violated.

Understanding these rights at the application stage empowers borrowers to make better decisions, avoid predatory lenders, and hold financial institutions accountable under Philippine law.