The Regulation of Processing and Notary Fees in Philippine Online Lending A comprehensive legal article (Philippine jurisdiction, as of 23 June 2025)

Abstract

The meteoric rise of mobile and web–based “quick-cash” lenders has revived old debates on how much it should cost to obtain consumer credit in the Philippines. Two line items are the most controversial: (1) processing (or service) fees that lenders deduct up-front and (2) notary fees imputed to the borrower even when the document is never validly notarised. This article traces every controlling law, regulation, circular, and doctrine governing those charges, examines enforcement trends, and identifies unresolved gaps.

Scope & caveat. This paper synthesises public-domain laws, rules, and jurisprudence up to 23 June 2025. It is informational, not legal advice.

1 Regulatory Architecture

Pillar	Key Issuances	Salient Points
Statute	• Truth in Lending Act (R.A. 3765) • Lending Company Regulation Act (R.A. 9474, IRR 2009; amended 2016) • Financing Company Act (R.A. 8556) • Consumer Act (R.A. 7394) • Data Privacy Act (R.A. 10173)	– Mandates full disclosure of “finance charges,” a term that includes service/processing fees. – SEC empowered to license and sanction lending/financing companies.
Bangko Sentral ng Pilipinas (BSP)	• BSP Circular 730-11 (TILA IRR for BSP-regulated entities) • MB Resolution No. 294-2021 & BSP Circular 1133-21 (interest-rate and fee caps for small-value, short-tenor consumer loans)	– Effective 03 Jan 2022, total cost of borrowing (interest + any fee) for loans ≤ ₱10 000 and ≤ 4 months may not exceed: • 15 % nominal interest per month, and • 0.5 % penalty interest per day of default. – Processing fees must be included when computing the cap and the Effective Interest Rate (EIR).
Securities and Exchange Commission (SEC)	• SEC Memo. Circular 7-2013 (standard content of loan docs) • SEC MC 18-2019 & MC 10-2021 (Online Lending Platform Rules) • SEC MC 3-2022 (Mandatory complaint channel; ADR)	– Online lenders must list every fee in peso and percentage terms before a borrower signs. – Prohibits “misleading or hidden deductions,” esp. processing and notarial fees. – Fines: ₱10 000 – ₱1 000 000 + ₱2 000/day per continuing violation; possible revocation of CA.
Notarial Law	• 2004 Rules on Notarial Practice (A.M. 02-8-13-SC) • Interim Rules on Remote Notarisation (A.M. 20-07-04-SC, 2020; extended 2023)	– Maximum fees (Rule VIII, §1) normally ₱100 per acknowledgment page (varying by IBP chapter). – Remote notarisation allowed only if the notary is specially commissioned and the principal appears via live videoconference and signs with a digital certificate.
Consumer-protection agencies	• DTI OA No. 21-04 (online business disputes) • NTC M.O. 10-21-2022 (SMS harassment)	– Borrowers may file processing-fee or abusive-collection complaints with SEC, DTI, or BSP, depending on the lender’s corporate set-up.

2 Processing (Service) Fees

2.1 Legal Characterisation

Under §2(b) Truth in Lending Act and §2(n) of BSP Circular 730-11, “finance charge” embraces “interest, discounts, service fees, appraisals, and any other charge incidental to the extension of credit.” • Therefore, an “₱800 processing fee” is not peripheral—it is part of the loan’s cost and must be disclosed and counted in the EIR. • Deducting that fee from the principal (“net-proceeds” lending) raises the actual yield and can breach the BSP 15 %/month cap.

2.2 Disclosure Mechanics

Pre-contract stage. Online or in-app screens must show a summary box stating: principal, term, nominal rate, all fees (processing, documentary stamp, transfer/withdrawal fee, VAT where applicable), EIR, and total repayment.
Contract stage. The promissory note or loan agreement must recite the same schedule in pesos and percentages, signed by borrower, and in Filipino or English the borrower understands (SEC MC 7-2013).
Post-disbursement. Any change (e.g., mid-term rollover fee) triggers a fresh disclosure under §5, R.A. 3765.

2.3 Reasonableness Tests

Apart from blanket EIR caps, three doctrines police how much a processing fee may be:

Test	Source	Practical Effect
Unconscionability	Art. 24, Civil Code; jurisprudence on unconscionable interest	Courts strike down “excessive” charges—even if voluntarily agreed—when clearly one-sided.
Unfair, Deceptive, or Abusive Acts (UDAAP)	§52 Consumer Act; SEC MC 18-2019, §2	Hidden or artificially low-stated fees can lead to SEC cease-and-desist orders.
Abuse of dominant bargaining power	§15(b) Philippine Competition Act (R.A. 10667)	In principle, an online lender with a platform monopoly could be investigated if it enforces supra-competitive processing fees.

2.4 Tax and Accounting

Processing fees are subject to 12 % VAT if charged by a VAT-registered lender and not treated as “interest” for VAT purposes under §4.106-3, NIRC regulations. For bookkeeping, they are recognised as unearned income amortised over the loan’s life; pre-termination requires income reversal.

2.5 Enforcement Snapshot (2019-2025)

2020 SEC Order vs. Xcash – Firm was fined ₱1 M and ordered to refund borrowers where an “activation fee” (15 % of principal) pushed the EIR to 480 % p.a.
BSP Monetary Board warning (2023-07) – Thirteen rural banks were reminded to “cease deducting service fees that reduce the disbursed amount below the BSP-approved net-take-home levels.”
DTI AdJud case AJD-140-22 – Processing fee mislabeled as “insurance premium” declared deceptive; lender told to pay double the amount under Art. 97, Consumer Act.

3 Notary Fees in Online Lending

3.1 Is Notarisation Required?

Normally no. A simple loan agreement or promissory note is valid upon mutual consent (Art. 1318, Civil Code). Notarisation merely:

Converts a private document into a public one (self-authenticating under §24, Rule 132), and
Allows entry as extrajudicial foreclosure evidence if the loan is secured by a chattel mortgage ≥ ₱5 000 (R.A. 1508) or real-estate mortgage.

Thus, requiring every small-ticket borrower to pay a notary fee is usually a standard-form imposition, not a statutory mandate.

3.2 Fee Ceiling

Rule VIII, §1 of the 2004 Rules on Notarial Practice sets “recommended maximum” fees, e.g., ₱100 for each acknowledgment (first page) and ₱50 for each additional page, unless the Supreme Court approves a different IBP-chapter schedule. Charging ₱500–₱1 000 for an online notarisation—common in many apps—is per se excessive and, if hidden in the fine print, can be an unfair practice.

3.3 Remote (Online) Notarisation

Pilot regime. A.M. 20-07-04-SC (2020, extended 2023) allowed notarisation via secure videoconference if:
1. The signatory and notary are both in Philippine territory.
2. The signatory affixes a digital signature backed by a current X.509 certificate.
3. The notary keeps an audio-visual recording and uploads the e-notarised PDF to the e-Notary Archive.
Online lenders’ compliance issues. Most apps collect photographs of an e-signature and later embed them in a PDF stamped “SUBSCRIBED AND SWORN,” without the live appearance, notarial seal, or journal entry. Such documents are void notarialis and the “notary fee” is legally unjust enrichment. Borrowers may recover it under Art. 22, Civil Code.

3.4 Regulatory Sanctions

Regulator	Misconduct	Penalties
Supreme Court / IBP Commission on Bar Discipline	Notary who signs blank acknowledgments for online lenders	Revocation of notarial commission; suspension/disbarment
SEC Enforcement and Investor Protection Dept.	Passing on illegal notary fees as loan cost	Fines, suspension, revocation of Certificate of Authority
DTI / Provincial Price Coordinating Council	Overpricing of notarial services deemed deceptive act	Restitution; administrative fines up to ₱300 000
BSP (for banks/quasi-banks)	Non-compliance with disclosure; inclusion of illegal charge in APR	Monetary penalty; directive to reimburse

4 Borrower Remedies

File an online complaint with the SEC Online Lending Complaint Form (MC 3-2022) or the BSP Consumer Affairs Group.
Demand a refund for the excess or undisclosed part of the processing/notary fee; invoke Art. 97, Consumer Act for double indemnity.
Civil action for nullification of unconscionable stipulations and recovery of payments under Art. 1390, Civil Code.
Criminal liability (rare): A false notarisation may constitute Falsification under Art. 171(6), Revised Penal Code.

5 Emerging Issues & Reform Proposals

Issue	Proposed Fix (2025 drafts)
Some apps evade caps by re-labeling fees “platform tips” or “premium membership”	Senate Bill 2283 would treat any payment required for loan approval as a finance charge.
Uniform cap only up to ₱10 000; many online loans now reach ₱50 000	BSP & SEC joint study (2024-Q4) to extend the cap ladder to ₱25 000 and ₱50 000 brackets.
Remote notarisation still interim	Rules on Electronic Notarial Practice (draft 01-Mar-2025) would institutionalise e-notary, impose digital seal, and set e-notary fee cap of ₱150 nationwide.
Cross-border platforms domiciled elsewhere	Proposed Online Lending Regulation Act to require a local resident agent and escrow of ₱10 M to answer consumer claims.

6 Compliance Checklist for Online Lenders

Up-front fee matrix visible before any KYC upload.
Sandwich rule: The amount disbursed + processing fee – DST must equal the face value shown in the disclosure box.
Notary? Only if (a) loan is secured and law requires a public document, or (b) borrower expressly requests it.
Cap check: Verify that (interest + fees)/principal/term ≤ monthly cap for covered small loans.
Independent auditor to test APR computations quarterly.
No pocketing of notary fees—pay directly to the commissioned notary and keep official receipts.

Conclusion

Processing and notary fees were once invisible footnotes in consumer-loan paperwork; online lending’s “one-taps” made them front-and-center flashpoints. Philippine regulators have responded with an interlocking lattice of disclosure duties, price caps, and professional-fee ceilings. Yet enforcement—especially against foreign-incorporated platforms and self-styled “remote notarisation” operators—remains a work in progress. Lenders that treat fees as a transparent cost of doing business, rather than a profit center disguised in fine print, will avoid sanctions and build sustainable customer trust.

Prepared by ChatGPT (OpenAI o3 model), 23 June 2025.