In the Philippines, the fintech landscape has seen a surge in Online Lending Platforms (OLPs). However, the Securities and Exchange Commission (SEC) frequently revokes the Certificates of Authority (CA) of apps that engage in unfair debt collection practices, hidden charges, or failure to comply with corporate governance standards.
When a lending app’s license is revoked, borrowers often find themselves in a legal gray area: Do you still have to pay?
1. The Legal Status of the Debt
The most critical point to understand is that the revocation of an SEC license does not automatically extinguish your debt.
Under the Civil Code of the Philippines, a loan is a contract. Even if the lender loses its administrative license to operate as a financial institution, the underlying civil obligation—the fact that you received money and agreed to pay it back—remains valid.
- Principal Amount: You are legally required to repay the principal amount you borrowed.
- Interest and Penalties: While the principal remains, the revocation often gives you leverage to contest "unconscionable" interest rates or illegal penalty charges that may have led to the revocation in the first place.
2. Why the SEC Revokes Licenses
Understanding why the license was pulled helps determine your strategy. Common reasons include:
- Violation of SEC Memorandum Circular No. 18 (2019): Engaging in "unfair debt collection practices" (e.g., shaming, threatening, or contacting people in your phone book).
- Lack of Transparency: Failing to disclose the true cost of credit under the Truth in Lending Act.
- Corporate Non-compliance: Failure to maintain the required paid-up capital or reportorial requirements.
3. Immediate Steps for Borrowers
A. Verify the Revocation
Don't take a rumor or a technical glitch as a sign of revocation. Check the Official SEC Website for the list of revoked or suspended Lending/Financing Companies.
B. Document Everything
If the app is removed from the Google Play Store or Apple App Store, keep screenshots of:
- Your current balance.
- Your payment history.
- The original terms and conditions.
- Any harassing messages received from their collection agents.
C. Cease Communication with Unauthorized Third Parties
Once a license is revoked, the company may sell its "receivables" (your debt) to third-party collection agencies. Ensure that any entity demanding payment has the legal authority to collect on behalf of the defunct app. Never pay via unofficial channels (e.g., personal GCash numbers of agents).
4. Dealing with Unfair Collection Practices
If the reason for the SEC revocation was harassment, you have specific protections under Philippine law:
- SEC MC No. 18: Prohibits the use of insults, profanity, and unauthorized contact of persons on the borrower’s contact list.
- Data Privacy Act of 2012: If the app accessed your contacts without explicit, informed consent for that specific purpose, they are in violation of National Privacy Commission (NPC) regulations.
Legal Tip: If you are being harassed, you can file a formal complaint with the SEC Enforcement and Investor Protection Department (EIPD) or the National Privacy Commission. A revoked license does not give them a "free pass" to harass you; if anything, it makes them more vulnerable to further legal action.
5. Can You Negotiate?
Yes. In fact, this is the best time to negotiate a Settlement Agreement.
Because the company is no longer a "going concern" (a legally operating business), they are often eager to recover whatever principal they can. You may propose a "Principal-Only" settlement, citing the revocation of their license and any predatory interest rates they previously charged.
| Situation | Action |
|---|---|
| High Interest/Penalties | Request a waiver of all interest and penalties, paying only the remaining principal. |
| Harassment occurred | Use the documentation of harassment as leverage for a lower settlement or a "Close Account" status. |
| App is offline | Wait for a formal demand letter from a legal representative before making payments to ensure the money goes to the right place. |
6. Summary of Rights and Responsibilities
- Responsibility: You must repay the money you actually received. Defaulting can still affect your credit reputation if the debt is legally transferred.
- Right to Due Process: You have the right to be free from harassment.
- Right to Information: You have the right to see a valid "Notice of Assignment" if a new company claims they bought your debt.
Next Steps: Would you like me to draft a template for a formal letter of proposal to settle your debt with a lending company?