Loan Company Demands Additional Fees Before Release: Borrower Remedies Under Philippine Law

This article is for general information only and is not a substitute for individualized legal advice. Philippine statutes and regulations cited are current as of 31 July 2025.

1. Typical Scenario

A borrower signs a loan agreement, satisfying all stated conditions, only to be told that the loan will not be released unless she first pays “extra” charges— often labeled processing, facilitation, insurance, or notarial fees. The demand may be sudden, undocumented, or far higher than market norms. When that happens, the borrower has several layers of legal protection.

2. Key Legal Framework

Pillar	Coverage	Core Protections
Republic Act (RA) 3765 – Truth in Lending Act (TLA)	All credit transactions (banks, lending & financing companies, pawnshops, micro-finance)	Lender must disclose in writing, before consummation, the total finance charge, itemized fees, and the “Annual Percentage Rate” (APR). Undisclosed charges are unlawful.
RA 9474 – Lending Company Regulation Act of 2007 & SEC rules	Lending companies (non-bank, non-credit-cooperative entities granting loans ≥ ₱10,000)	Caps on processing fees (≤ ₱5 per ₱100 of loan or ₱1,000, whichever is lower, unless SEC approves higher). Prohibits “hidden charges.” Violators face ₱10k–₱50k fine + 6 mos–10 yrs imprisonment; SEC may suspend or revoke the Certificate of Authority.
Bangko Sentral ng Pilipinas (BSP) Circular 1048 & Subsequent Memos	Banks, quasi-banks, digital banks, and their subsidiaries	Mandatory Key Information Disclosure sheet; restrictions on pre-release fees unless (i) expressly agreed and (ii) reflected in the disclosure.
RA 11765 – Financial Products and Services Consumer Protection Act (FCPA) (2022)	All financial service providers (FSPs) regulated by BSP, SEC or Insurance Commission	Declares as “unfair, deceptive, or abusive practice” (UDAP) any fee not properly disclosed or that unreasonably constrains the consumer. Empowers BSP/SEC to order refund, disgorgement of profits, administrative fines up to ₱2 million per breach (+ ₱100k/day continuing violation).
Consumer Act (RA 7394) & DTI Fair Trade Regulation	Goods & services, including credit arrangements by financing companies	Prohibits misrepresentation and grossly unfair or unconscionable sales acts; allows DTI to impose fines/closure.
Civil Code of the Philippines	All contracts	• Art. 1159: Obligations arising from contracts have the force of law.
• Arts. 1306-1311: Parties may establish stipulations provided they are not contrary to law, morals, or public policy.
• Art. 1390: Voidable contracts where consent is vitiated by fraud or undue influence.
Doctrine of Unconscionability & Supreme Court jurisprudence	All lending	Courts may strike down unconscionable or iniquitous interest and charges (§ Holm v. Carpio, G.R. 218874, 23 Jan 2019; § Spouses Abellera v. Spouses Bejar, G.R. 196579, 12 Nov 2014).

3. When Do “Additional” Fees Become Illegal?

Not in the disclosure statement given prior to signing (TLA, FCPA).
Exceeding statutory caps (e.g., RA 9474 limits).
Imposed after perfection of the loan contract without fresh consideration.
Coercive condition precedent—withholding disbursement despite full compliance.
Misleading labels (“optional insurance” that is in fact compulsory).
Fee lacks a legitimate cost basis or is patently disproportionate to the service rendered (test of reasonableness).

If any of these apply, the borrower can treat the charge as void and demand refund or release without payment.

4. Immediate Steps for Borrowers

4.1 Document Everything

Retain the loan agreement, disclosure statement, text/email exchanges, phone recordings (under the two-party consent rule, ask permission), and official receipts.
Take screenshots of app notifications if using an online lender.

4.2 Send a Formal Demand Letter

Cite RA 3765, RA 9474, or the FCPA.
Give the lender five (5) to ten (10) days to (a) release the loan without extra fees or (b) provide a written legal basis.
State intent to file regulatory and/or court action if ignored.

4.3 Regulatory Complaints

Regulator	Jurisdiction	Where / How to File
SEC Financing & Lending Division (CGFD)	Lending companies & financing companies	Online via eFAST portal or in person at SEC HQ, Mandaluyong. Attach demand letter & evidence.
BSP Financial Consumer Protection Department (FCPD)	Banks, e-money issuers, pawnshops, microfinance NGOs	File online (FCP Portal) or e-mail consumeraffairs@bsp.gov.ph; copy of complaint referred to bank for comment within 7 days.
DTI Fair Trade Enforcement Bureau (FTEB)	Financing companies not under SEC supervision; deceptive sales	Walk-in or online via DTI ConsumerCare.
National Privacy Commission (NPC)	If data-harassment accompanies the fee demand (e.g., contacting phone contacts)	File via eReklamo portal for privacy violations.

Regulators may order release, refund unlawful fees, impose administrative fines, and suspend licenses. Under RA 11765, regulators may also adjudicate monetary claims ≤ ₱10 million.

4.4 Court Action

Forum	Claim Type	Threshold / Notes
Small Claims Court (MetCTC/MTC)	Refund of fees, damages, or enforcement of release	Amount ≤ ₱400,000 (2022 A.M. 08-8-7-SC). No lawyer required; decision in ≤ 30 days.
Regular Trial Court (RTC)	Larger civil claims; declaratory relief (nullity of fee clause)	Claim > ₱400,000 or complex issues.
Criminal Complaint	Violation of RA 9474 or estafa (Art. 315 RPC)	Filed with Office of the City/Provincial Prosecutor. Requires proof of deceit & damage.

Tip: For time-sensitive releases (e.g., housing loan with a seller’s deadline), consider filing an action for specific performance with prayer for preliminary mandatory injunction.

5. Potential Defenses Lenders May Raise & Borrower Rebuttals

Lender’s Argument	Borrower’s Counter-Point
“The fee is industry practice.”	Industry use ≠ legality. Statutes override custom.
“It was in the fine print.”	If absent from the mandatory disclosure statement, it is void (RA 3765 § 4).
“You signed an omnibus deed of assignment agreeing to any future charges.”	Blanket future-charge clauses are struck down as potestative and unconscionable under Art. 1308 & case law.
“Release conditional on insurance for your benefit.”	Compulsory credit-life insurance is allowed only if premium equals actual cost and is disclosed; otherwise, violative of BSP Circular 933 § 305.3.

6. Evidence Checklist

Signed loan contract & disclosure sheet
Schedule of amortization originally provided
Receipts or deposit slips for prior payments
Written / electronic communication of the additional fee demand
Record of regulatory complaint filing & reference numbers
Proof of damages (e.g., lost opportunity, penalties from delayed purchase)

7. Practical Tips to Avoid Future Issues

Read the Key Information Disclosure Sheet—banks and legit lenders must give this.
Ask upfront: “Are there any other fees payable before release or after approval?”
Insist on official receipts that cite the legal basis for each fee.
Verify lender legitimacy: SEC Certificate of Authority (for lending companies) or BSP Certificate (for banks).
Maintain written communication; avoid purely verbal assurances.
Report early: regulators often resolve matters faster before the loan is disbursed.

8. Summary

Under Philippine law, any charge not timely disclosed, statutorily capped, or reasonably related to the cost of granting credit is presumptively unlawful. Borrowers confronted with surprise “release fees” have layered remedies—from a simple demand letter to administrative and criminal actions. Recent enactment of the Financial Consumer Protection Act greatly accelerates regulatory intervention, making it faster than ever to compel release or obtain a refund.

9. Primary Legal References (Philippines)

RA 3765 – Truth in Lending Act (1963) & BSP/SEC Implementing Rules
RA 9474 – Lending Company Regulation Act of 2007 & SEC Memorandum Circular 7-2007
RA 11765 – Financial Products and Services Consumer Protection Act (2022)
BSP Circular 1048 (2020) – Revised Financial Consumer Protection Framework
BSP Circular 1133 (2021) – Key Information and Disclosure (Consumer Loans)
Consumer Act, RA 7394 – Title III, Unfair or Unconscionable Sales Acts
Civil Code of the Philippines – Arts. 1159, 1306-1311, 1390
Rules of Procedure for Small Claims Cases (A.M. 08-8-7-SC, as amended 2022)
Relevant Supreme Court Decisions: Holm v. Carpio, G.R. 218874 (23 Jan 2019); Spouses Abellera v. Spouses Bejar, G.R. 196579 (12 Nov 2014).

Borrowers who know these rights—and the regulators willing to enforce them—can effectively resist “mid-stream” fee extortion and keep loan costs transparent and fair.