ONLINE LENDING SCAMS & EXCESSIVE CHARGES IN THE PHILIPPINES
A 2025 Legal Primer
1. Explosive growth of app-based credit—and its dark side
App-only “salary-loan” and “cash advance” providers mushroomed during pandemic lockdowns. By early 2025 the Securities and Exchange Commission (SEC) had logged more than 400 online lending platforms (OLPs), roughly one-third of which were either unlicensed or already the subject of cease-and-desist orders (CDOs) for harassment, usury-level pricing or data-privacy violations. (Harassment from Online Lending App - respicio.ph)
2. How the typical scam works
| Stage | Tactics borrowers report |
|---|---|
| On-boarding | Hidden deductions (e.g., service fees as high as 35 % of the cash actually disbursed); forced access to phonebook and social-media contacts. (NPC conducts hearings on 48 online lending apps after over 400 ..., Online lenders barred from harvesting borrowers’ phone and social-media ...) |
| Loan life-cycle | Interest or “processing” fees that breach statutory caps (see § 5); repeated “top-up” offers that trap users in rolling debt. |
| Collection | Threat messages, public shaming posts, fake “subpoenas” and mass texts to the entire contact list—acts expressly banned by SEC MC 18-2019 & MC 19-2019. (Online Lending Platform SEC Registration Compliance, SEC cancels license of online lending platform for alleged unfair ...) |
3. Core statutes & implementing rules
| Law / Issuance | Key points for OLPs |
|---|---|
| RA 9474 – Lending Company Regulation Act (2007) | SEC licence (Certificate of Authority), ₱1 million paid-up capital, disclosure of finance charges, possible revocation or ₱10,000–₱50,000 fine per day of continuing violation. (Excessive Penalty and Harassment in Online Lending) |
| RA 8556 – Financing Company Act (1998) | Parallel regime for “financing companies.” (Excessive Penalty and Harassment in Online Lending) |
| RA 3765 – Truth-in-Lending Act | Mandates written disclosure of all “finance charges.” Failure ≈ criminal fine + civil damages. (Excessive Deductions and Harassment by Online Lending Apps Philippines) |
| RA 11765 – Financial Products and Services Consumer Protection Act (FPSCPA, 2022) | Gives SEC, Bangko Sentral ng Pilipinas (BSP) & Insurance Commission power to issue enforceable directives, impose up to ₱2 million fine per act plus daily penalties, and file criminal cases (up to 5 yrs jail) for abusive practices. (Republic Act No. 11765 - The Lawphil Project) |
| BSP Circular 1133-2021 + SEC MC 3-2022 | For unsecured loans ≤ ₱10,000 with tenor ≤ 4 months: • Nominal rate cap: 6 %/month (0.2 %/day) • Effective rate cap: 15 %/month (0.5 %/day) • Total cost cap: 100 % of the amount borrowed. Violation: ₱25k–₱100k fine per count & possible licence revocation. (SEC implements cap on lending, financing firms’ interest rates, Interest rates, fees on small loans capped - SUNSTAR) |
| SEC MC 18 & 19-2019 | Enumerate unfair collection acts (violence threats, profanity, public disclosure of debt, contact-list harassment, etc.). (Online Lending Platform SEC Registration Compliance) |
| SEC MC 10-2021 | Moratorium on new OLPs after 2 Nov 2021; existing apps must pass stricter vetting and renewal tests. (SEC stamps out unregistered online lending apps - Inquirer.net) |
| SEC MC 19-2023 | Requires every financing/lending company to register each OLP with the SEC and the Credit Information Corp. before public release; unregistered apps are automatically illegal. (Online Lending Platform SEC Registration Compliance) |
| Data Privacy Act (RA 10173) + NPC Circular 22-02 (2023) | Scraping an entire phonebook is “disproportionate” → unauthorised processing; NPC may fine up to ₱5 million per act and order takedown of the app. (Privacy Commission orders immediate takedown of four online lending apps, NPC Releases Updated Guidelines on the Processing of Personal Data for ...) |
| Cybercrime Act (RA 10175) | Online libel, grave threats or unjust vexation via ICT → penalty one degree higher than analogue offence. |
| SIM-Registration Act (RA 11934, 2022) | Enables tracing of anonymous collectors and text-blast scammers. |
4. Interest-rate control despite the “suspended Usury Law”
● Act No. 2655 (Usury Law) ceilings have been suspended since 1982, but courts still strike down “unconscionable” rates under Art. 1229 Civil Code and public-policy doctrine.
● Leading Supreme Court rulings: Medel v. CA (1998, 5 %/mo. void), Estorga v. Isla (2018, 10 %/mo. void), Spouses Abaga v. EGN Lending (2023, 23 % p.a. + 1 %/day penalties void). (SC Nullifies Exorbitant, Unconscionable Loan Interest Rate, G.R. No. 233974. July 02, 2018 (Case Brief / Digest))
● Trial courts routinely recompute the obligation at 12 % p.a. (before 1 July 2013) or 6 % p.a. (thereafter), then deduct payments actually made.
5. Enforcement landscape (2023-2025 snapshot)
| Date | Agency action | Ground |
|---|---|---|
| Jan 14 2025 | SEC revoked Surity Cash licence for unfair collection. (SEC cancels license of online lending platform for alleged unfair ...) | MC 18-2019 violations |
| Sep 20 2024 | CDO vs. 11 OLPs (Cash Whale, Cash 100, etc.). ([SEC] SEC orders halt to 11 more online lending apps) | Operating without CoA |
| Jun 26 2024 | CDO vs. 6 lending firms for ignoring MC 3-2022 & data-compliance orders. (SEC orders 6 lending firms to stop operations - Manila Bulletin) | Excessive charges |
| 2023 | Google delisted 33 illegal apps at SEC request. (SEC, Google remove 33 illegal lending apps - Manila Bulletin) | Unfair practices |
| NPC 2022-2024 | Multiple ₱1-5 M fines + takedown of apps like “PondoPeso.” (Excessive Deductions and Harassment by Online Lending Apps Philippines, Harassment by Online Lending Apps Legal Remedies Philippines) |
6. Borrower remedies
- File a verified complaint with the SEC Corporate Governance & Finance Dept. (Form CGFD-1). Reliefs: CDO, licence revocation, fines up to ₱1 M/violation, referral for criminal indictment. (Excessive Deductions and Harassment by Online Lending Apps Philippines)
- Complain to the National Privacy Commission for data-harvesting or shaming; reliefs include takedown orders, administrative fines and damages. (Privacy Commission orders immediate takedown of four online lending apps, [NPC] NPC summons 67 more online lenders - Credit Information Corporation)
- Civil suit to annul usurious terms and recover over-payments, moral damages, attorney’s fees (based on Art. 19, 20, 21 Civil Code & Supreme Court doctrine).
- Criminal charges for estafa, libel, unjust vexation, grave threats, falsification, plus qualified cybercrime penalties.
- BSP consumer assistance (if the lender is a BSP-supervised fintech).
- NBI-Cybercrime or PNP-ACG for large-scale swindling or phishing components.
7. Preventive due-diligence tips
- Verify the lender in the SEC list of recorded OLPs or the list of revoked/suspended companies before borrowing. (Home - SEC - Securities and Exchange Commission)
- Demand the full disclosure statement (FDS) required by RA 3765; compare stated APR with the 6 % nominal/15 % EIR caps where applicable.
- Never grant an app access to your entire contact list or gallery; such permission is not required for legitimate “know-your-customer” (KYC) checks.
- Keep screenshots of all threat messages and payment receipts—they are primary evidence for SEC/NPC or court action.
- Consider licensed microfinance NGOs or credit cooperatives which typically charge 2–3 %/month declining balance.
8. Legislative horizon
Several House and Senate bills filed in 2024-2025 seek to:
- Re-activate the Usury Law with a flexible cap linked to BSP policy rates;
- Centralise licensing of all digital-only lenders under one “Digital Credit Authority” (House Bill No. 8754);
- Criminalise “doxxing for debt collection.”
Watch these measures—they may overhaul compliance timelines for existing platforms.
9. Key take-aways for practitioners & consumers
- Interest caps now exist for small, short-term loans even though the general Usury Law remains suspended.
- Unfair collection is per-se illegal—a single harassing text can cost a lender millions in fines plus licence revocation.
- Data-privacy enforcement has teeth; scraping contacts is punishable even when the borrower “consented” inside the app.
- Courts can retroactively void unconscionable interest and recalculate at judicial rates, slashing a borrower’s liability.
- Regulatory coordination is rising—SEC, BSP, NPC and tech platforms (Google Play) now share blacklists in real-time.
In short: Philippine law now offers a dense web of statutory controls, rate ceilings, disclosure rules and privacy safeguards to curb online-lending abuse. Knowing the interplay of RA 9474, RA 11765, BSP Circular 1133, SEC MC 18/19/10/3, and RA 10173 equips both lawyers and consumers to fight back against scams and excessive charges—and, where necessary, to shut rogue apps down.