Online Lending App Interest Rates and Harassment Issues in the Philippines

A comprehensive legal overview (updated to May 2025)

1. Introduction

Smart-phone–based “online lending platforms” (OLPs) exploded in the Philippines from 2016 onward, offering fast, unsecured micro-loans to the underserved. Their rise exposed two legal flashpoints:

Sky-high, opaque pricing (interest, fees, penalties); and
Abusive collection methods—public shaming, doxxing, threats, and relentless calls.

This article unpacks every key Philippine law, regulation, circular, and remedy that governs those twin issues, together with emerging jurisprudence and pending bills.

2. Regulatory map: who polices what?

Authority	Core mandate (OLP context)	Key issuances
Securities and Exchange Commission (SEC)	Licenses lending/financing companies, registers each online lending platform, enforces conduct rules	• RA 9474 (Lending Company Regulation Act)
• SEC MC 19-2019 – registration of OLPs
• SEC MC 18-2019 – Prohibition of unfair collection practices
• SEC MC 10-2021 – Integrated complaints system
• SEC MC 03-2022 – Revised NLPR (name-lending platform registration)
Bangko Sentral ng Pilipinas (BSP)	May fix interest-rate ceilings (Usury Law powers), sets consumer-protection standards for BSP-supervised financial institutions (BSFIs)	• RA 11765 (Financial Products & Services Consumer Protection Act)
• BSP Circular 1165 (2023) – Credit-card cap (3 %/month on interest; ₱200/transaction fee cap)
National Privacy Commission (NPC)	Protects personal data; stops abusive data-scraping and “contact-list harvesting”	• RA 10173 (Data Privacy Act)
• NPC Circular 20-01 – Guidelines on processing data for loans
Department of Justice / NBI / PNP	Enforces criminal law for threats, libel, unjust vexation, estafa, etc.	Penal Code arts. 282 (grave threats), 287 (unjust vexation), 353 et seq. (libel); RA 10175 (Cybercrime)
Courts & Alternative Dispute Resolution (ADR)	Annul unconscionable stipulations; award damages	Civil Code arts. 1306, 1229; ADR Act

3. Interest-rate regulation

Usury Law suspended, but not dead. – Central Bank Circular 905 (1982) lifted statutory ceilings, yet §4, RA 9474 keeps a standing order: lending-company rates “shall not exceed the maximum prescribed by the Monetary Board.” In practice, no general cap exists today, so contractually agreed rates govern—subject to civil-law limits on unconscionability.
Sector-specific caps (proof the MB can still act):
- Credit-cards: BSP Circular 1165 (effective Nov 3 2023) – 3 %/month interest; ₱200 cap on cash-advance fees.
- Salary loans of financing companies offering “Buy Now Pay Later” products: pilot cap 0-6 %/month under BSP sandbox rules (2024).
Civil-law guardrails when no cap applies:
- Article 1229, Civil Code – Courts may reduce “excessive” penalties.
- Article 19, 20, 21 & 24 – Abuse of right, unjust enrichment, and equity principles.
- Macalinao v. BPI Family Bank (G.R. 166223, Oct 23 2007): SC voided 5 %/month penalty as “unconscionable,” even absent a statutory ceiling.
Truth in Lending Act (RA 3765) requires full disclosure of the effective interest rate (EIR) and all non-interest charges before contract signing (reinforced by RA 11765, §17).
Tax angle: Documentary stamp tax of ₱1 per ₁₀₀ pesos on loan documents, plus value-added tax on service fees if lender is a VAT-registered financing company.

4. Harassment & unfair collection practices

Prohibited act	Legal basis	Typical sanction
Publicly posting borrower’s photo or debt on social media, group chats	SEC MC 18-2019 §3(b); Data Privacy Act §§25-34	₱25k-5 M fine, up to 5 yrs prison (criminal DP Act); SEC revocation
Contacting people in the borrower’s phonebook without consent	idem + NPC Circular 20-01, RA 10173	Cease-and-desist + damages
Threatening violence or arrest	Penal Code art. 282; RA 10175 (if online)	6 mos-6 yrs prison
Using counterfeit “demand letters” with forged lawyer signatures	Penal Code art. 172 (falsification)	2-6 yrs + fines
Continuous calls/SMS after 9 p.m. or on Sundays	SEC MC 18-2019 §3(a)	SEC administrative penalties
Gender-based online shaming	RA 11313 (Safe Spaces Act)	₱100k fine, 2-4 yrs prison

SEC MC 18-2019 further bans:

obscene language;
contacting workplace HR;
false delinquency “blacklists.”

Under RA 11765 (2022), abusive collection is now a criminal offense punishable by ₱50 K – ₱2 M fine and 3-10 years imprisonment when committed by a “financial service provider or its agents.”

5. Data-privacy obligations of OLPs

Lawful basis for processing personal data must be consent or legitimate interest (§12, RA 10173). Blanket “contact scraping” lacks proportionality → unlawful.
NPC enforcement: Over 100 CDOs (2019-2024) closed apps like “Cashalo,” “Cash Jar,” and “Peso Qo” for harvesting contacts and harassment.
Security measures: encryption at rest and in transit (NPC Circular 16-03).
Data retention: maximum 5 years after account closure unless longer required by AMLA (RA 9160).

6. Licensing & compliance checklist for operators

Requirement	Source	Notes
SEC Lending/Financing Company primary license	RA 9474 / RA 5980	Minimum ₱1 M paid-up capital (lending) or ₱10 M (financing)
Certificate of Authority (CA)	SEC	Renewable every 3 yrs
Registration of each mobile app	SEC MC 19-2019	Must disclose algorithm for interest computation
Consumer assistance desk & ADR mechanism	SEC MC 19-2019 §5; RA 11765	15-day resolution period
Submission of complaint statistics	SEC MC 10-2021	Quarterly

Failure = ₱10k-100k fine per count + CA revocation.

7. Borrower remedies

File a verified complaint with the SEC Financing and Lending Companies Division (online portal).
Report data-privacy violations to NPC; request issuance of Cease & Desist Order (CDO).
Criminal action – file affidavit with NBI-Cybercrime or PNP-ACG for threats, libel, falsification.
Civil suit to nullify loan clauses and recover moral/exemplary damages—venue can be where the borrower resides (Rule 4, Rules of Court).
BSP mediation/conciliation (if lender is a BSFI, e.g., a rural bank front-end app).
Credit-information cleansing: If harassment proven, borrower may demand deletion of negative data under §25, RA 9510 (Credit-Information System Act).

8. Recent jurisprudence & agency actions (2019-2025)

People v. Castillon (CTA Crim Case O-730, 2021) – First conviction for unlawful debt collection under MC 18-2019, ₱400k fine.
NPC v. Fynamics Lending (CDO 19-07, 2022) – NPC ordered database deletion of 1.3 M records.
SEC revocations: As of Feb 2025, 175 OLP certificates of authority revoked; 83 others suspended pending audit (SEC press releases 2024-2025).
BSP Sandbox: 2024 pilot capped “nano-loans” at 36 % p.a. effective rate, testing viability of a permanent ceiling.

9. Policy gaps & pending bills (19th Congress)

Bill	Salient feature
Senate Bill 1849 “Anti-Predatory Lending Act”	36 % p.a. nationwide cap, bans “confession of judgment” clauses
House Bill 6773	Creates Digital Lending Oversight Board with SEC, BSP, NPC seats
Senate Bill 2407	Automatic debt restructuring at 24 % p.a. if lender not properly registered with SEC

10. Practical take-aways

For borrowers: keep records of calls/SMS; lodge complaints early—SEC & NPC act fastest when evidence is preserved.
For lenders: factor in total cost of credit, not just nominal rate; embed “dark-pattern free” UX; train collectors to follow Fair Debt Collection Principles (time-of-day, language, privacy).
For counsel: rely on unconscionability doctrine plus RA 11765’s stronger criminal hooks; seek provisional gag orders to stop online shaming.
For policymakers: experience shows targeted caps (credit cards, nano-loans) work better than blanket ceilings that may push credit underground.

11. Conclusion

While no across-the-board statutory interest ceiling yet exists, the combination of RA 11765’s criminal sanctions, SEC’s Memorandum Circulars, and the courts’ willingness to strike down “unconscionable” rates provide an expanding toolkit against abusive OLPs. Parallel enforcement by the NPC has blunted the worst harassment tactics. Still, legislative action on a uniform rate cap and a dedicated digital-loan regulator would close the remaining loopholes.

Borrowers, lenders, and counsel must therefore track:

Any Monetary Board issuance re-activating general interest ceilings (a genuine possibility after the ongoing BSP sandbox); and
Passage of SB 1849 or its counterparts, which would radically alter the pricing landscape.

Until then, vigilance, full-cost transparency, and respect for data privacy remain the main pillars of lawful online lending in the Philippines.