Unauthorized Loan Issuance by Lending App

Unauthorized Loan Issuance by Lending Apps in the Philippines

A 2025 legal-regulatory primer

1. What “unauthorized” means in Philippine law

An online or mobile lending application (OLA) is unauthorized when it either (a) operates without the Securities and Exchange Commission (SEC) Certificate of Authority (CA) required by the Lending Company Regulation Act of 2007 (LCRA, RA 9474) or (b) fails to register the specific app/website with the SEC as an Online Lending Platform (OLP) under Memorandum Circular (MC) 19-2019 and the 2021 moratorium on new OLPs (MC 10-2021). Continuing to disburse or collect on loans after a cease-and-desist order (CDO) likewise renders every ensuing loan “unauthorized.” (R.A. 9474 - The Lawphil Project, Disclosure Requirements on Advertisements of Financing Companies and ..., SEC stamps out unregistered online lending apps - Inquirer.net)

Important variant: Some rogue OLAs push money into a consumer’s e-wallet or bank account without valid, informed consent—often after the borrower merely “priced” a loan in-app. When consent is vitiated, the loan contract can be void or rescissible under the Civil Code (Arts. 1390-1397) and LCRA §12, exposing the operator to estafa and unfair-collection charges. (Online lenders barred from harvesting borrowers’ phone and social-media ...)

2. Statutory & regulatory framework

Layer Key instruments Core rules
Primary licence RA 9474 + Implementing Rules; SEC CA ₱1 M paid-in capital; Filipino majority ownership; separate CA for each OLP. (R.A. 9474 - The Lawphil Project, IMPLEMENTING RULES AND REGULATIONS OF LENDING COMPANY REGULATION ACT OF ...)
OLP registration & advertising SEC MC 19-2019 Pre-launch filing of screenshots, data-flow, privacy notice; in-app display of corporate name, SEC Reg. No. & CA No. (Disclosure Requirements on Advertisements of Financing Companies and ...)
SEC MC 10-2021 Moratorium: only OLPs on record as of 2 Nov 2021 may operate; new OLPs suspended pending revised guidelines. (SEC stops registration of online lending platforms)
Debt-collection conduct SEC MC 18-2019 Bans threats, obscenities, “contact-shaming,” public disclosure of debt. (SEC cancels license of online lending platform for alleged unfair practices - Manila Standard)
Cost-of-credit caps BSP Circular 1133-2021 → SEC MC 3-2022 For unsecured loans ≤ ₱10 000 & ≤ 4 months: 6 % nominal / 15 % effective interest per month; service fee ≤ 5 %. (Interest rates, fees on small loans capped - SUNSTAR, SEC ISSUES RULES TO IMPLEMENT BSP CEILINGS ON INTEREST RATES AND OTHER ...)
Data privacy Data Privacy Act 2012 (RA 10173); NPC Circular 20-01 (2020) & 2022-02 Prohibits scraping phone or social-media contacts and using personal data for harassment. (NPC Circular No. 20-01 - National Privacy Commission, NPC Circular No. 2022 02 - privacy.gov.ph)
Consumer-finance Bill of Rights Financial Products & Services Consumer Protection Act (“FCPA”, RA 11765, 2022) Empowers SEC/BSP to award restitution, disgorgement; fines up to ₱10 M or 1 % of assets per violation; criminalizes unfair or deceptive acts. (Republic Act No. 11765 - The Lawphil Project, How to Respond to Harassing Practices and High Interest by Online ...)
Truth-in-Lending RA 3765 + BSP Circular 730 Mandatory pre-contract APR and total-cost disclosure in the app. (Loan App Term Change Excessive Interest Consumer Rights Philippines)

3. Conduct that creates unauthorized loans

  1. Operating or lending without a CA – automatic illegality; every loan voidable (LCRA §12).
  2. Using an unregistered or delisted app – each disbursement violates MC 19-2019 & MC 10-2021; directors/officers are solidarily liable. (SEC stamps out unregistered online lending apps - Inquirer.net)
  3. Collecting fees or interest above the BSP-SEC caps – renders the cost portion unenforceable; excess must be refunded per MC 3-2022. (Interest rates, fees on small loans capped - SUNSTAR)
  4. Disbursing funds without the borrower’s clear, affirmative consent – void for lack of meeting of minds; possible estafa (RPC Art. 315).
  5. Continuing operations after a CDO or licence revocation – every post-order loan is unauthorized and may invoke in pari delicto defenses for the borrower. Recent cases: Surity Cash (2025) and Copperstone Lending (2024). (SEC cancels license of online lending platform for alleged unfair practices - Manila Standard, License of online lending operator Copperstone Lending revoked)

4. Liability exposure

Offence Governing law Penalties
No SEC CA / unregistered OLP RA 9474 §12 ₱50 000–₱1 M per loan + 5-20 yrs prison; CA/Corp. Reg. revocation. (R.A. 9474 - The Lawphil Project)
Abusive collection, “debt-shaming” SEC MC 18-2019; RA 11765 Up to ₱2 M admin fine per act; restitution; criminal prosecution. (SEC cancels license of online lending platform for alleged unfair practices - Manila Standard, Excessive Deductions and Harassment by Online Lending Apps Philippines)
Illegal data processing RA 10173; NPC Circular 20-01 ₱5 M + 1-6 yrs; director disqualification. (Online lenders barred from harvesting borrowers’ phone and social-media ...)
Interest above cap BSP Circ. 1133; SEC MC 3-2022 Refund of excess + ₱25 000-₱100 000 per violation; suspension of lending authority. (SEC ISSUES RULES TO IMPLEMENT BSP CEILINGS ON INTEREST RATES AND OTHER ...)
Syndicated loan-sharking (≥5 persons) PD 1689 Reclusion temporal to reclusion perpetua. (Excessive Deductions and Harassment by Online Lending Apps Philippines)

5. Enforcement trends (2019 – 2025)

6. Remedies for affected borrowers

  1. File a verified complaint with the SEC Financing & Lending Companies Dept. (FinLenD); reliefs include restitution, interest re-computation, and shutdown orders.
  2. NPC complaint for data-privacy breaches (online portal or e-mail).
  3. BSP Financial Consumer Protection Desk if the OLA is tied to a bank, EMI, or OPS. (Inclusive Finance - Consumer Protection - Bangko Sentral ng Pilipinas)
  4. Civil action / Small-Claims (< ₱400 000) for refund and damages; Abellera v. PNB (G.R. 248678, 2023) confirms courts may strike down “shocking” interest even in signed e-contracts. (Excessive Deductions and Harassment by Online Lending Apps Philippines)
  5. Criminal complaint (estafa, grave threats, libel) with the NBI-Cybercrime Division or local prosecutor.

7. Compliance checkpoints for legitimate fintechs

Stage Must-have controls
Pre-launch SEC CA; OLP registration; privacy-by-design audit; AML risk rating.
On-boarding Clear APR disclosure; OTP-based e-signature; DPA-compliant consent forms (no bundled contact-list access).
Servicing Real-time amortisation ledger in-app; grace-period reminders; collector script that avoids prohibited acts.
Collections / Default Written demand only; one courteous call/day; no social-media posts; observe 100 % total-cost cap.
Reporting Quarterly portfolio & complaints report to SEC; AMLA CTR/STR filings where applicable.

8. Forthcoming developments (2025-2026 outlook)

  • Draft SEC “Fit-and-Proper” Rules for OLP Directors – would require fintech founders to pass integrity & competency screening similar to bank “DQ” rules.
  • Senate Bill 1846 (“Online Lending Regulation Act”) proposes a single-window licence and a ₱5 M minimum capital for high-volume OLAs.
  • BSP Digital Lending Guidelines (exposure draft Jan 2025) to embed FCPA standards in the Manual of Regulations for Non-Bank Financial Institutions.

Key take-aways

Any loan issued by an unlicensed or improperly registered app is legally precarious. Borrowers can invoke multiple statutes to void the debt, seek restitution, and penalize abusive operators. On the supply side, fintech lenders must treat licensing, privacy, consumer-protection, and interest-rate caps as indivisible compliance pillars—the cost of ignoring any one of them is business-ending.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

Privacy Policy

Terms of Use

Lawyer Login

 
 
Privacy Policy         Terms of Use         Lawyer Login