Responding to a Home Credit Demand Letter for Unpaid Loan

A practical and legal guide for Philippine borrowers

1. What a “demand letter” is— and why it matters

Key point	Legal basis / notes
A demand letter is a formal, written notice that you are in default (i.e., have missed one or more required payments).	Art. 1169, Civil Code (obligations become “due and demandable” only after a demand, unless demand is unnecessary under the contract).
It usually states the amount due, accrued interest, penalties, and a deadline (“cure period”) to pay.
It serves four purposes: (1) proof that Home Credit tried to collect amicably; (2) trigger for default interest and penalties; (3) prerequisite to filing a collection suit; (4) possible basis for reporting to credit bureaus.	BSP Memorandum No. M-2020-019 (fair treatment of financial consumers) requires creditors to show proof of prior notice before legal action.

2. First steps when you receive the letter

Check authenticity
- Verify the sender’s letterhead, contact details, reference number, and spelling of your name and address.
- Scammers sometimes mimic collection letters; call Home Credit’s official hotline (02-7753-5712) to confirm.
Note the deadline (“X days from receipt”). Put the date of actual receipt on the envelope or take a photo as evidence.
Compare the figures
- Look at your original loan disclosure statement.
- Recompute interest and late-payment charges; Republic Act (“RA”) 3765 (Truth in Lending Act) gives you the right to full cost disclosure.
Gather documents
- Contract, receipts, screenshots of your account ledger, SMS/email conversations, any proof of partial payments.
Check if you have defenses
- Payment defenses – you already paid (Art. 1291, Civil Code).
- Illegal charges – interest above the contract rate, or penalties > 3% per month may be unconscionable (Central Bank Circular 960-03).
- Force majeure / pandemic-related defenses – Bayanihan to Heal as One Act (RA 11469) and Bayanihan 2 (RA 11494) provided payment moratoria in 2020–2021; prove you qualified but were not accorded relief.

3. Drafting your response

A response is not legally required, but it (a) shows good faith, (b) may stop harassment, and (c) can serve as evidence later.

Sample structure:

Heading with your name, address, contact number, loan account number.

Acknowledgment of receipt of the demand letter and its date.

Statement of facts (when you obtained the loan, how much you have already paid).

Good-faith explanation for default (e.g., job loss, medical emergency).

Concrete proposal:

Lump-sum settlement (offer a discounted payoff).

Installment plan (state amount, frequency, start date).

Request for condonation of penalties or reduced interest.

Request for documentary evidence of the balance computation.

Ask that all future communications be in writing and during allowed hours (cf. BSP Circular 1048, §6.25, Debt Collection Practices).

Closing, your signature over printed name.

Attach supporting documents (proof of income reduction, medical certificates, etc.).

Tip: Send your reply via registered mail with return card or courier with tracking. Keep the registry receipt—proof you exercised diligence.

4. Negotiation strategies

Situation	What to do	Why it helps
You can pay 40 – 70 % in cash	Offer a lump-sum settlement; ask for waiver of interests/penalties and issuance of a Quitclaim and Release.	Saves Home Credit litigation costs; closes the matter quickly.
Steady but reduced income	Propose a restructured plan: smaller installments over a longer term, with interest frozen or reduced.	BSP Consumer Protection Standards encourage lenders to “exercise flexibility” in hardship cases.
No capacity now, but likely in 6 months	Request a payment holiday followed by graduated payments.	Shows willingness and keeps the account from immediate filing.
Debt is close to the prescriptive period*	Negotiate harder—creditor may prefer a discount than risk a time-barred claim.	Written loan actions prescribe in ten (10) years (Art. 1144, Civil Code).

* The 10-year period counts from the date the cause of action accrued (usually the maturity of the last unpaid installment).

5. Know your protections against abusive collection

Prohibited act	Source	What to do if it happens
Threats of violence, obscene language, public shaming	BSP Circular 1048; RA 10173 (Data Privacy Act)	Record calls/SMS; file a complaint with BSP-CRO or the NPC.
Calling between 9 p.m. and 6 a.m.	BSP Circular 1048 §6.25(b)	Document date/time; demand cessation.
Contacting your employer or relatives without consent	Same as above	Invoke §§11-18, Data Privacy Act; damages under Art. 32, Civil Code.
Misrepresenting as police, court officers, or threatening arrest for “utang”	Only courts can issue warrants; imprisonment for debt is unconstitutional (Art. III §20, 1987 Constitution).	Report to PNP anti-cybercrime or barangay.

6. Possible creditor actions after the demand period

Internal / outsourced collection continues.
Negative credit reporting to the Credit Information Corporation (CIC) and private bureaus.
Small-claims case (if amount ≤ ₱ 400,000) under A.M. 08-8-7-SC; filing fee is modest, and lawyers are not required.
Civil action for sum of money in the appropriate MTC/RTC.
Replevin if the loan is secured by a purchase-money chattel mortgage (e.g., a mobile phone or appliance).
Endorsement to a special purpose vehicle (SPV)—your loan could be sold to a third-party debt purchaser, who must still comply with BSP debt collection rules.

7. Consequences of ignoring the letter

Time frame	Likely events	Notes
Within 1-3 months	Increased calls/texts; home visits.	Must be within 6 a.m.-9 p.m., max. once per week (BSP Circular 1048).
3-12 months	Account may be “charged off” and written off; sold to an SPV; negative credit record.	Write-off ≠ waiver; debt still legally collectible.
Up to 10 years	Home Credit (or assignee) may sue.	Summons will be served; non-appearance can lead to default judgment.
After 10 years	Claim is prescribed; creditor can no longer sue, but may still request payment informally.	You must raise prescription as a defense in court; it is not automatic.

8. If a lawsuit is filed

Do not ignore the summons. File an Answer within 30 days (15 days in small-claims).
Consider compulsory counterclaims (e.g., moral damages for abusive collection).
Explore court-annexed mediation; many courts encourage settlement.
If the debt is modest, you may appear pro se (without a lawyer) in small-claims, but legal advice is still recommended.
A judgment can be enforced through garnishment of bank accounts, levy on property, or wage deduction (up to 25 %, Art. III, Labor Code). Social Security benefits and some assets are exempt.

9. Special concerns

OFWs – Verify if the demand letter was sent to your local address; service abroad has special rules (Rule 14, ROC).
Joint signatories / co-makers – All solidarily liable parties can be sued; demand on one is demand on all.
Death of borrower – Claim survives and can be filed against the estate within the probate proceeding (Rule 87 §5, ROC).
Insurance – Some Home Credit loans include credit-life insurance; check if the policy can satisfy the balance in case of death or disability.

10. Checklist before you send your reply

Verified letter’s authenticity and balance computation
Calculated what you can realistically pay
Selected a negotiation strategy
Prepared supporting documents (proof of hardship, receipts)
Drafted a written response with clear proposal and deadline
Sent via traceable mail or email to the official address
Saved copies and screenshots of all communications

Bottom line

A demand letter is not yet a lawsuit—but it is your last, best chance to settle on terms you can live with. Respond promptly, assert your rights under Philippine consumer-protection and debt-collection regulations, and approach negotiations with a concrete, good-faith plan. If the amount is too large or the case proceeds to court, seek professional advice from a financial adviser, the Public Attorney’s Office (PAO), or an accredited private lawyer.