Online Lending App Service Fees and Cancellation: How to File a Complaint With the SEC and NBI

Introduction

In the Philippines, the rise of online lending applications (apps) has revolutionized access to credit, particularly for individuals and small businesses underserved by traditional banks. These platforms, often operated by financing companies or lending firms, provide quick loans through mobile apps, leveraging technology for instant approvals and disbursements. However, this convenience has been marred by controversies surrounding excessive service fees, aggressive collection practices, and difficulties in loan cancellations. The regulatory framework is primarily governed by the Securities and Exchange Commission (SEC), which oversees lending companies under Republic Act No. 9474 (Lending Company Regulation Act of 2007), as amended, and various SEC memorandum circulars. Additionally, the National Bureau of Investigation (NBI) handles criminal aspects, especially those involving cybercrimes or fraud.

This article comprehensively explores service fees and loan cancellation in the context of online lending apps, common legal issues, and step-by-step guidance on filing complaints with the SEC and NBI. It is based on Philippine laws and regulations, emphasizing consumer rights under the Consumer Act of the Philippines (Republic Act No. 7394) and data privacy laws like Republic Act No. 10173 (Data Privacy Act of 2012).

Understanding Service Fees in Online Lending Apps

Service fees are charges imposed by online lending apps beyond the principal loan amount and interest. These may include processing fees, platform fees, documentation fees, or administrative charges. While not inherently illegal, they must comply with strict regulations to prevent usury or unfair practices.

Legal Regulations on Service Fees

Interest Rate Caps and Transparency: Under SEC Memorandum Circular No. 28, Series of 2019, lending companies must disclose all fees upfront in the loan agreement. The Truth in Lending Act (Republic Act No. 3765) mandates full disclosure of the effective interest rate (EIR), which includes service fees. The Bangko Sentral ng Pilipinas (BSP) and SEC cap interest rates for non-bank lenders at reasonable levels, typically not exceeding 36% per annum when combined with fees, to avoid predatory lending.
Prohibited Fees: Excessive or hidden fees are prohibited. For instance, SEC rules ban "advance interest" deductions where fees are taken from the loan principal before disbursement, effectively reducing the amount received by the borrower. Apps cannot charge fees for services not rendered or impose penalties that disproportionately inflate the debt.
Common Practices and Issues: Many apps deduct service fees (e.g., 10-20% of the loan amount) upfront, leading to complaints of "effective high-interest loans." Borrowers often report fees labeled as "convenience" or "technology" charges that push the total cost beyond legal limits. Violations can include non-disclosure, leading to deceptive practices under the Consumer Act.

Borrower Rights Regarding Fees

Borrowers have the right to:

Receive a clear breakdown of all fees before signing.
Question and negotiate fees if they seem unreasonable.
Seek refunds for overcharged or unauthorized fees through the lender's internal dispute resolution or regulatory bodies.

If fees are found excessive, they may be deemed void under Civil Code provisions on contracts (Articles 1305-1422), as they could be contrary to public policy.

Loan Cancellation in Online Lending Apps

Loan cancellation refers to the borrower's right to withdraw from a loan agreement before or after disbursement, or to pre-terminate without undue penalties.

Legal Basis for Cancellation

Cooling-Off Period: Under the Consumer Act and SEC guidelines, borrowers may cancel within a reasonable period (typically 7-14 days) post-approval if no disbursement has occurred, without penalties. For disbursed loans, pre-termination is allowed, but fees must be prorated.
Procedures for Cancellation:
1. Notify the lender in writing (via app, email, or registered mail) stating the intent to cancel.
2. Return any disbursed funds immediately to avoid accrual of interest.
3. The lender must refund any fees paid if cancellation is valid.
Penalties and Restrictions: Lenders cannot impose "no-cancellation" clauses that violate consumer rights. Early termination fees are capped (e.g., not exceeding 5% of the remaining balance under some SEC rules). Refusal to allow cancellation or imposing exorbitant penalties can be grounds for complaints.

Common Challenges

Borrowers often face app interfaces that make cancellation difficult, automatic renewals without consent, or threats of blacklisting. These practices may infringe on the Data Privacy Act if personal data is mishandled during the process.

Common Violations and Consumer Protections

Online lending apps have been criticized for:

High Fees Disguised as Services: Leading to debt traps where borrowers repay far more than borrowed.
Harassment in Collections: Including cyberbullying, which violates SEC Memorandum Circular No. 19, Series of 2019, prohibiting unfair debt collection.
Unauthorized Access to Contacts: Apps accessing phone contacts for shaming, a breach of privacy laws.
Fraudulent Apps: Unregistered lenders operating illegally, evading SEC oversight.

Protections include:

The Anti-Usury Law (Act No. 2655, as amended).
Cybercrime Prevention Act (Republic Act No. 10175) for online harassment.
Rights to file class actions or seek damages in court.

Filing a Complaint with the SEC

The SEC is the primary regulator for registered lending companies. Complaints focus on regulatory violations like excessive fees, non-disclosure, or unfair practices.

Eligibility and Grounds

Any borrower or affected party can file if the app is SEC-registered (check via SEC's online database).
Grounds: Violation of lending laws, including fees and cancellation issues.

Step-by-Step Process

Gather Evidence: Collect loan agreements, fee breakdowns, screenshots of app interfaces, payment records, and correspondence with the lender.
Attempt Internal Resolution: Contact the app's customer service for amicable settlement. If unresolved, proceed to SEC.
File the Complaint:
- Visit the SEC website (www.sec.gov.ph) or nearest SEC office.
- Use the SEC's Enforcement and Investor Protection Department (EIPD).
- Submit via email (eipd@sec.gov.ph) or online portal: A sworn complaint affidavit detailing the facts, parties involved, and relief sought (e.g., refund, cancellation, penalties on the lender).
- Attach supporting documents.
- No filing fee for consumer complaints.
SEC Investigation: The SEC will investigate, potentially issuing cease-and-desist orders, fines (up to PHP 1 million per violation), or revocation of license.
Timeline: Initial acknowledgment within days; resolution may take 1-3 months, depending on complexity.
Outcomes: Possible refunds, loan adjustments, or referral to courts for civil damages.

For unregistered apps, SEC can investigate for illegal operations and coordinate with other agencies.

Filing a Complaint with the NBI

The NBI handles criminal complaints, especially those involving fraud, cybercrimes, or threats related to fees and cancellations.

Eligibility and Grounds

For serious offenses like estafa (swindling under Revised Penal Code Article 315), cyber libel, or violations of the Cybercrime Act.
Examples: Fraudulent fee charges, online harassment during cancellation attempts, or identity theft.

Step-by-Step Process

Gather Evidence: Similar to SEC, include digital evidence like chat logs, emails, or recorded calls.
File the Complaint:
- Go to the NBI Cybercrime Division (main office in Quezon City or regional offices).
- Submit a complaint-affidavit in person or via email (cybercrime@nbi.gov.ph).
- Detail the incident, identify the app/operators, and specify criminal violations.
- No filing fee, but notarization of affidavit may cost PHP 100-200.
NBI Investigation: Agents will verify, gather more evidence, and possibly conduct entrapment or raids. They may coordinate with the Philippine National Police (PNP) Anti-Cybercrime Group.
Timeline: Preliminary investigation within weeks; full probe may take months.
Outcomes: Filing of criminal charges in court, arrests, or shutdown of illegal operations. Victims may seek damages.

For urgent threats, file directly with the PNP or DOJ for faster action.

Additional Remedies and Tips

Other Agencies: Involve the Department of Trade and Industry (DTI) for consumer protection or the National Privacy Commission (NPC) for data breaches.
Legal Aid: Seek free assistance from the Integrated Bar of the Philippines (IBP) or Public Attorney's Office (PAO) if indigent.
Prevention: Always verify app registration on SEC's list, read terms carefully, and borrow only what you can repay.
Class Actions: If widespread, join group complaints for stronger impact.
Recent Developments: As of 2025, the SEC has intensified crackdowns on errant apps, with over 2,000 unregistered platforms blacklisted. Borrowers are encouraged to report promptly to curb abuses.

In conclusion, while online lending apps offer financial inclusion, vigilance on fees and cancellation rights is crucial. Filing with the SEC addresses regulatory lapses, while NBI tackles crimes, ensuring accountability in the digital lending space. Consult a lawyer for personalized advice, as laws evolve.

Disclaimer: Grok is not a lawyer; please consult one. Don't share information that can identify you.