In the wake of the digital transformation of the Philippine financial landscape, online lending platforms (OLPs) have proliferated, providing accessible credit to underserved sectors. However, this growth has been accompanied by a surge in reports regarding predatory behavior, specifically involving unfair collection practices and digital harassment.

To safeguard the rights of borrowers and maintain the integrity of the financial system, the Securities and Exchange Commission (SEC) has implemented stringent regulations, primarily through SEC Memorandum Circular No. 18, Series of 2019 (MC 18).

The Scope of the Prohibition

The SEC rules apply to all financing companies (FCs) and lending companies (LCs), including their third-party service providers (TPSPs) or outsourced collection agencies. Under the principle of vicarious liability, the lending company is held responsible for the actions of the agencies they hire.

The regulations prohibit any act that involves threats, obscenity, or harassment to compel a borrower to pay a debt.

Prohibited Collection Practices

The SEC explicitly identifies several behaviors that constitute "unfair collection practices." These include, but are not limited to:

The Use of Violence or Threats: Any use or threat of physical force, violence, or other criminal means to harm the physical person, reputation, or property of any individual.
Obscene and Profane Language: Using insults, epithets, or "shaming" language intended to degrade the borrower.
Public Disclosure of Debt: Posting or threatening to post a borrower's name and personal details on social media, or any other public forum, as a "delinquent payer."
Contacting the Borrower’s Contact List: Accessing the borrower’s phone contacts without explicit consent, or using such contacts to harass, message, or inform third parties about the borrower's debt. This is a significant violation of the Data Privacy Act of 2012.
False Representation: Falsely claiming to be a lawyer, a court representative, or a government official to intimidate the borrower.
Contact at Unreasonable Hours: Contacting the borrower before 6:00 AM or after 10:00 PM, unless the borrower has given express consent or the debt is more than sixty (60) days past due.
Contacting the Workplace: Communicating with the borrower at their place of employment if the collector knows or has reason to know that the employer prohibits such communication.

Data Privacy and Online Harassment

One of the most prevalent forms of online lending harassment involves "debt shaming" via social media or SMS blasts to a borrower’s contacts. The SEC, in coordination with the National Privacy Commission (NPC), views the unauthorized access of a borrower’s contact list and the subsequent disclosure of debt information as a criminal violation of privacy.

Lending apps are prohibited from requiring access to a user's contacts, photos, or files as a condition for a loan, as these permissions are often used as leverage for harassment.

Regulatory Sanctions and Penalties

The SEC imposes heavy penalties on LCs and FCs that violate MC 18. The severity of the penalty depends on the frequency of the offense:

First Offense: A fine ranging from ₱25,000 to ₱50,000.
Second Offense: A fine ranging from ₱50,000 to ₱100,000.
Third Offense: A fine of ₱100,000 to ₱1,000,000, and/or the suspension or revocation of the company’s Certificate of Authority (CA) to operate as a lending or financing company.

The SEC has, in numerous instances, issued Cease and Desist Orders (CDOs) and revoked the licenses of dozens of OLPs found to be engaging in systematic harassment.

Remedial Measures for Borrowers

Borrowers who are victims of harassment or unfair collection practices have several legal avenues for redress:

SEC Enforcement and Investor Protection Department (EIPD): Victims can file a formal complaint with the SEC, providing evidence such as screenshots of messages, call logs, and social media posts.
National Privacy Commission (NPC): If the harassment involves data privacy breaches (e.g., accessing contacts), a complaint for violation of the Data Privacy Act can be filed.
PNP Anti-Cybercrime Group (PNP-ACG): For cases involving grave threats and online libel, the police can initiate criminal investigations.

Summary of Legal Responsibility

Lending companies are mandated to conduct themselves with "humanity, politeness, and civic-mindedness." While the law recognizes the right of a lender to collect a legitimate debt, that right ends where the borrower's right to privacy and human dignity begins. Compliance with SEC MC 18 is not merely a suggestion but a requirement for the continued legal operation of any lending entity in the Philippines.