1) Why this topic matters in the Philippine setting

The Philippines has long had a large “informal credit” ecosystem (from neighborhood “5-6” style lenders to salary/pawn-based lending), and in recent years, a surge of online lending platforms (OLPs) and app-based “cash loans” has intensified complaints about:

lenders operating without the required authority or registration, and
loan terms that impose extreme interest, penalties, and fees that borrowers experience as oppressive or abusive—often paired with aggressive collection tactics.

Two legal ideas commonly intersect:

Regulatory legality: Is the lender authorized to engage in lending as a business?
Contract fairness: Even if a loan exists, are the interest, penalties, and charges enforceable—or can courts strike them down or reduce them as unconscionable?

This article maps the legal framework and the possible complaints and remedies available in the Philippines.

2) Regulatory landscape: who is allowed to lend (and under what authority)

“Lending” itself is not illegal. The key is how it is done (casual personal loan vs. lending as a business to the public) and what legal category the lender falls into.

A. Banks and BSP-supervised financial institutions

Banks and many non-bank financial institutions are regulated by the Bangko Sentral ng Pilipinas (BSP).
If an entity presents itself like a bank, takes deposits, or performs quasi-banking functions without authority, that triggers a different (and often more serious) regulatory problem.

B. SEC-supervised lending and financing companies

Two major categories are commonly implicated in “cash loan” complaints:

Lending companies (generally corporations engaged in granting loans from their own capital) are regulated under the Lending Company Regulation Act of 2007 (Republic Act No. 9474) and SEC rules.
Financing companies (which may engage in broader financing and receivables-based transactions) are regulated under the Financing Company Act of 1998 (Republic Act No. 8556) and SEC rules.

In practice, many app-based consumer lenders claim to be a “lending company” or “financing company” (or operate through one). They are typically expected to have:

SEC registration as the appropriate entity, and
an SEC Certificate of Authority to operate (and compliance with SEC reporting and operational rules).

C. Cooperatives and other special regimes

Credit cooperatives operate under the Cooperative Code and the Cooperative Development Authority (CDA), not the SEC lending-company framework.
Pawnshops and certain money service businesses have their own regulatory regimes (often BSP-related).

D. Individuals who lend

A private person can lend money. The regulatory problem usually arises when the person is effectively operating a lending business to the public (repeatedly, for profit, advertised, systematic), especially if the law treats that activity as requiring registration/authority.

3) What “unregistered lending” commonly means

In consumer complaints, “unregistered lending” usually refers to one or more of these situations:

A. Operating as a lending/financing business without SEC authority

Red flags include:

the lender markets loans publicly (social media, ads, apps),
lends repeatedly to numerous borrowers,
uses standardized contracts or app terms,
demands “service fees,” “processing fees,” “membership fees,” or systematic penalties,
uses a business name implying a regulated activity.

B. Misrepresenting status or hiding the true lender

Sometimes the app or collector claims:

“SEC registered” without proof,
“partnered with a registered company,” but the actual contracting entity is unclear,
the collecting entity is different from the contracting entity.

C. Operating without local permits (business permit, BIR registration)

This is not the same as SEC authority, but it can support complaints that the operation is illegitimate.

Important practical point: Even if the lender lacks the proper authority, the existence of a loan transaction may still be recognized by courts for purposes of returning the principal (to prevent unjust enrichment). But the lender’s lack of authority can support:

administrative/criminal exposure for the lender, and
challenges to abusive charges and collection conduct.

4) Interest, fees, and penalties: the core legal rules borrowers should know

A. Interest must be expressly stipulated in writing (Civil Code)

Under Article 1956 of the Civil Code, no interest is due unless it has been expressly stipulated in writing.

What this means in practice:

If a lender claims interest but cannot show a written stipulation (or the stipulation is ambiguous), the borrower may argue no contractual interest is collectible.
“In writing” can include signed loan agreements and promissory notes; for app-based lending, the evidentiary question becomes: what exactly did the borrower agree to, and can the lender prove it?

B. Even if there is no contractual interest, legal interest may apply as damages for delay

If a borrower is in default and a proper demand exists, courts may award legal interest as damages under the Civil Code principles on delay/forbearance—separate from contractual interest.

C. Penalties, liquidated damages, and “collection fees” are not automatically enforceable

Contracts often add:

penalty interest (e.g., “late fee” per day),
liquidated damages (fixed amounts),
“collection fees” or “attorney’s fees.”

Courts may reduce penalties and liquidated damages if they are iniquitous or unconscionable (Civil Code Article 1229 is frequently invoked). Even if a contract says “non-negotiable,” courts can still moderate abusive stipulations.

D. Compound interest (“interest on interest”) is restricted

As a general rule under the Civil Code, unpaid interest does not earn interest unless specific legal conditions apply (commonly, judicial demand, or a clear stipulation under the governing Civil Code provisions and jurisprudence). Many app loan structures mimic compounding through “service fees” and “renewal fees,” which can be attacked as disguised interest.

E. The Truth in Lending Act (RA 3765): disclosure of finance charges

The Truth in Lending Act requires lenders in covered credit transactions to disclose key credit terms, including the finance charge and effective cost of credit.

A borrower complaint often focuses on:

hidden charges deducted upfront (so the borrower receives far less than the “loan amount”),
unclear schedules and penalty triggers,
misleading “flat” interest that becomes exorbitant when annualized.

Failure to properly disclose can create civil exposure and, depending on circumstances, potential criminal/administrative consequences.

5) Unconscionable interest in the Philippines: the doctrine and how courts approach it

A. Usury ceilings were lifted, but courts still police unconscionability

Historically, the Philippines had statutory interest ceilings under the Usury Law. Interest rate ceilings were later effectively lifted through central bank issuances. But the lifting of ceilings did not give lenders a blank check.

Philippine courts repeatedly recognize that interest rates may be reduced when they are:

unconscionable,
iniquitous,
excessive relative to circumstances, or
imposed through unequal bargaining power (adhesion contracts, desperation loans).

B. What makes interest “unconscionable” in real cases

Courts look at context, not just a number. Factors commonly considered include:

Magnitude of the rate (monthly rates that balloon annually; daily penalties)
Total effective cost (interest + fees + penalties + rollovers)
Borrower’s position (distress, take-it-or-leave-it terms, no meaningful choice)
Transparency (were charges clearly disclosed or disguised?)
Industry comparators (is it far beyond ordinary commercial rates?)
Conduct (bad-faith collection practices can reinforce the sense of oppression)

C. Typical outcomes when interest is found unconscionable

When courts find rates unconscionable, they often:

reduce the interest to a reasonable rate, sometimes aligning with legal interest benchmarks used in jurisprudence;
strike or reduce penalties;
disallow hidden “fees” treated as disguised interest; and
recompute obligations based on principal + moderated charges.

This can happen:

as a defense in a collection case, or
as a borrower’s affirmative action (e.g., to recover overpayments or stop enforcement of abusive terms).

6) Common abusive structures in app-based and informal lending

Understanding patterns helps frame complaints:

A. “Upfront deductions” that inflate the real interest

Example pattern:

Loan “amount”: ₱10,000
Borrower receives: ₱7,000–₱8,000 after “processing/service/membership fees”
Repayment demanded: ₱10,000+ within days/weeks

The “fees” function like interest, raising the effective rate dramatically.

B. Daily penalty accrual and snowballing charges

Late fees computed daily (or penalty interest on top of interest) can quickly exceed principal.

C. “Renewal,” “extension,” or “rollover” fees

Borrowers pay to extend, but the payment mostly covers fees, not principal—keeping borrowers trapped.

D. Collection harassment and public shaming

Complaints often include:

contacting the borrower’s phonebook contacts,
threats, insults, or defamatory posts,
impersonation of government agents,
threats of immediate arrest without due process,
sending messages to employers and relatives.

These behaviors trigger legal issues beyond contract law (privacy, criminal law, consumer protection).

7) Possible complaints and remedies in the Philippines

This section focuses on where to complain, what to allege, and what relief is realistic.

A. Complaints with the Securities and Exchange Commission (SEC)

Best for:

lenders operating as lending/financing companies without SEC authority,
online lending platforms and their accredited entities,
violations of SEC rules on OLP operations and debt collection practices.

Typical allegations:

Operating without a Certificate of Authority (or misrepresenting authority)
Using an OLP without proper disclosure/registration
Unfair debt collection practices (harassment, threats, public shaming)
Misleading loan terms and hidden charges

Evidence to attach:

screenshots of the app listing, terms, and fee tables
the account/loan dashboard showing amounts received vs amounts demanded
collection messages/call logs
proof of payments
identity of the collecting entity (names, numbers, bank accounts, e-wallet accounts)

What the SEC can do (generally):

investigate,
impose administrative sanctions,
revoke/suspend authority (for entities under its jurisdiction),
issue cease-and-desist actions within its powers,
coordinate enforcement.

B. Complaints with the National Privacy Commission (NPC) (Data Privacy Act)

Best for:

misuse of personal data in collection, especially OLPs that harvest contacts/photos/location or message third parties.

Common privacy violations:

processing data beyond what is necessary for the loan,
using contacts to shame or pressure,
disclosing the borrower’s debt to third parties without lawful basis,
inadequate consent (bundled, unclear, coerced “consent” inside app permissions).

Evidence:

app permission prompts and screenshots
messages sent to contacts (ask contacts for screenshots)
proof that the lender accessed the phonebook
privacy policy screenshots (if any)
complaint affidavits from affected third parties

Relief/exposure:

compliance orders, possible administrative findings, and potential referral for prosecution under the Data Privacy Act’s penal provisions when warranted.

C. Consumer-protection and trade-practice complaints (DTI / other relevant bodies)

Depending on the nature of the transaction and the institution involved, complaints may be framed as:

deceptive or unfair practices (misrepresentation of costs, hidden charges),
unfair contract terms,
abusive collection behavior as an unfair business practice.

The best forum can vary by the entity type and facts. For app lending, SEC + NPC are often the most directly relevant regulators, but other avenues may support a broader case strategy.

D. Civil remedies in court (to reduce/strike charges, recover overpayments, stop harassment)

1) Defensive use (most common): If the lender sues for collection, the borrower can raise defenses such as:

no written stipulation of interest (Civil Code Art. 1956)
unconscionable interest and penalties (request judicial reduction)
improper computation / failure to account for payments
null/unenforceable fees as disguised interest
damages/counterclaims for harassment, privacy violations (depending on proof)

2) Borrower-initiated civil actions: Possible civil claims include:

reformation/annulment of onerous stipulations
accounting and recomputation
recovery of sums paid in excess of what is legally due
damages for abusive conduct (where facts support it)
injunction/temporary restraining order in exceptional cases (usually needs strong proof and meets strict standards)

3) Small claims (when appropriate): If the borrower’s claim is mainly for a sum of money within the current small claims threshold set by Supreme Court rules, small claims may be a practical path (no lawyers required in hearings, streamlined procedure). Suitability depends on:

the nature of the claim (refund/overpayment vs complex injunctive relief), and
the amount involved (thresholds can change by Supreme Court issuance).

E. Criminal complaints (Prosecutor’s Office / PNP / NBI)

Criminal exposure depends on conduct. Common complaint theories include:

1) Violations of lending/financing regulatory laws Operating without authority can carry penal provisions under the applicable special law and implementing rules, depending on facts and prosecutorial evaluation.

2) Threats, coercion, harassment-related offenses (Revised Penal Code) Where collectors engage in:

threats of harm,
coercion,
persistent harassment rising to criminal annoyance/offensiveness,
extortion-like behavior.

3) Libel / cyberlibel (if public shaming includes defamatory imputations) Posting accusations (e.g., “scammer,” “criminal”) to others, especially online, may be framed as libel/cyberlibel if it meets statutory elements and defenses do not apply.

4) Data Privacy Act offenses Unauthorized disclosure and misuse of personal data can be criminally actionable in serious cases.

5) Impersonation / false authority Some collectors pretend to be from courts, police, or government, or claim “warrants” will be issued immediately. Depending on specifics, this can support criminal theories related to false pretenses, unlawful threats, or other applicable offenses.

Where to file:

Generally, criminal complaints begin with a complaint-affidavit filed with the Office of the City/Provincial Prosecutor for preliminary investigation, supported by documentary evidence and witness affidavits.

8) Building a strong complaint: evidence and computation

Regardless of forum, outcomes often turn on documentation.

A. Document the “true loan economics”

Create a simple computation:

“Stated loan amount”
Less: upfront deductions (processing/service/membership fees)
Net cash received
Total demanded for repayment
Time to repay (days/weeks/months)
Penalties triggered and how computed
Amount already paid
Balance demanded

This helps show:

disguised interest,
effective cost of credit,
unconscionability of total charges.

B. Preserve collection conduct evidence

screenshots of SMS/DMs
call logs and recordings (be careful: recording rules and admissibility can be fact-specific; written logs and screenshots are often safer baseline evidence)
messages to third parties (ask third parties for screenshots and affidavits)
social media posts

C. Identify the real entity

Try to capture:

the contracting party named in app/terms
payee details (bank/e-wallet accounts)
collector names/numbers
email addresses/domains
receipts with merchant/legal entity names

Entity identification is crucial for SEC/NPC complaints and for serving summons in civil cases.

9) Key legal “anchor points” commonly used in borrower arguments

These are recurring doctrinal anchors in Philippine disputes:

Civil Code Art. 1956: interest must be expressly stipulated in writing.
Civil Code Art. 1229: courts may reduce iniquitous/unconscionable penalties/liquidated damages.
Unconscionable interest doctrine in jurisprudence: courts can reduce excessive interest despite the absence of rigid usury ceilings.
Truth in Lending Act (RA 3765): credit cost disclosure duties; hidden charges can be attacked.
Data Privacy Act (RA 10173): misuse/disclosure of personal data in collection is a distinct legal wrong.
Criminal law protections: threats, coercion, defamation, and related misconduct can be separately actionable.

10) What to expect: realistic outcomes and common pitfalls

A. Likely “best case” outcomes

Reduction/striking of excessive interest and penalties in court recomputation
Administrative sanctions against abusive OLPs or unregistered operators
Orders compelling compliance with privacy and fair collection standards
Recovery of overpayments where properly proven

B. Common pitfalls

Lack of proof of the actual agreed terms (especially with apps whose terms change or disappear)
Not preserving screenshots early
Paying through channels that don’t generate reliable receipts
Confusing the “collector” with the actual legal entity
Assuming “unregistered” automatically cancels the duty to repay principal (courts often prevent unjust enrichment)

11) Practical complaint framing (issue → forum → theory)

If the lender appears unregistered / no authority:

SEC: operating without authority; misrepresentation; OLP compliance failures
LGU/BIR-related (supporting): operating a business without permits/registration (contextual)

If the charges are extreme:

Court (civil): unconscionable interest; invalid interest for lack of written stipulation; reduce penalties; accounting/recomputation; recover overpayment

If the collection involves harassment or public shaming:

SEC: unfair debt collection practices
NPC: misuse/disclosure of personal data
Prosecutor: threats/coercion/libel/cyberlibel (depending on facts)

If the lender hid fees or misled the borrower:

Civil: contract reformation/annulment of onerous stipulations; damages if provable
Truth in Lending: nondisclosure/misrepresentation theory (forum strategy varies)

12) Bottom line

In the Philippines, the law treats lending disputes as more than “you borrowed, you must pay.” A borrower may still owe principal, but interest, penalties, and collection conduct are heavily scrutinized through:

SEC regulation (authority to operate; OLP compliance; collection conduct),
Civil Code rules (written interest requirement; moderation of penalties; equitable reduction of unconscionable interest),
Truth in Lending (disclosure of finance charges), and
Data Privacy and criminal law (when collection crosses into harassment, defamation, or unlawful data use).