When Non-Payment of a Loan Constitutes Estafa in the Philippines

Short answer: Not paying a loan is ordinarily a civil matter (collection of sum of money). It becomes estafa (a criminal offense under the Revised Penal Code) only when deceit or abuse of confidence attended the transaction and the lender suffered damage. Below is a complete, practice-oriented guide in Philippine context.

1) Legal foundations (in plain English)

Estafa (swindling): Article 315 of the Revised Penal Code (RPC). It punishes specific ways of defrauding another by deceit or by abuse of confidence, causing damage (actual loss or prejudice capable of monetary estimation).
Related but separate:
- B.P. Blg. 22 (“Bouncing Checks Law”) – punishes issuing a worthless check; intent is generally irrelevant.
- P.D. 115 (Trust Receipts Law) – treats the dishonest failure to return/deliver goods or proceeds under a trust receipt as estafa (modeled on abuse of confidence).
Civil Code concepts matter: a simple loan (mutuum) transfers ownership of the money to the borrower; a deposit/agency/commodatum does not.

2) General rule vs. criminal rule

General rule (civil only)

If A borrows ₱100,000 from B and simply fails to pay on due date, with no deception or entrustment, that is breach of contract, not estafa. B’s remedy is civil: demand, negotiate, or sue for collection.

When it can be estafa

Non-payment crosses into criminal liability only if one of the estafa modes below is present and there is damage:

3) The estafa modes most relevant to loans

A) Deceit at the time of obtaining the loan — RPC Art. 315(2)(a)

Elements (what must be shown):

False pretense or fraudulent act (e.g., using a fictitious name; pretending to own assets or have authority; presenting forged or spurious documents; concealing material facts) made before or at the moment the loan was granted;
The lender relied on that deceit and, because of it, parted with money;
The lender suffered damage (e.g., unpaid principal/interest, costs, opportunity loss).

Key nuances:

The lie must be prior or simultaneous with the loan. Breaking a promise later (e.g., “I’ll pay next week”) is not deceit.
Intent to defraud can be inferred from conduct (e.g., serial borrowing using fake identities), but mere inability to pay is not criminal.

Practical examples:

Borrower claims to be a company officer authorized to borrow, shows a forged board resolution, gets the loan, then disappears.
Borrower submits “bank statements” or “land titles” later proven spurious to induce approval.

B) Bouncing check used to obtain the loan — RPC Art. 315(2)(d)

Elements (simplified):

Borrower postdates/issues a check to induce the lender to release money at that time;
Borrower knows of lack of funds/credit upon issuance (the law provides a presumption after notice of dishonor and failure to make good within a short statutory period);
Check is dishonored; lender suffers damage.

Critical distinctions:

For estafa under the RPC, the check must be part of the deception that secured the loan. If the check was given only as security for a pre-existing debt (i.e., the money had been released earlier for reasons unrelated to the check), that usually defeats estafa under this paragraph (no causal deceit).
This is different from B.P. 22, which can still apply to any worthless check (even if issued as security), provided statutory notice of dishonor and failure to pay within 5 banking days are shown.

C) Misappropriation/Conversion of money received in trust — RPC Art. 315(1)(b)

Elements (simplified):

Accused received money or property in trust, on commission, for administration, or under obligation to deliver or return a specific thing or sum;
He misappropriated/converted it (used it as his own, contrary to the agreed purpose), or denied receipt;
Lender/owner suffered damage.

Why a simple loan usually isn’t included: In mutuum, ownership of money passes to the borrower; there is no obligation to return the same bills, only to pay an equivalent. Thus, failure to pay is not misappropriation.

When it applies:

Money is given for a specific purpose (e.g., “Use these funds to pay Supplier X today, then give me the official receipt”), but the recipient pockets it.
Under trust receipts, the signatory fails to deliver proceeds or return the goods; criminal liability can attach under P.D. 115 (treated as estafa).

4) What does not amount to estafa (common pitfalls)

Mere non-payment or breach of promise without prior deceit.
Bad business judgment or losses in a venture the lender knew was risky.
Checks issued after the fact just to cover an already-existing debt (for RPC estafa under 315(2)(d) this typically fails; B.P. 22 may still apply).
Inability to pay due to illness, job loss, or market crash without original deceit.
Loans mislabeled as “trust” but actually mutuum upon closer reading (ownership of money transferred).

5) Estafa vs. B.P. 22 (bouncing checks): quick comparison

Feature	Estafa (RPC)	B.P. 22
Nature	Crime of fraud; needs deceit and damage	Special law; issuing a worthless check is punishable regardless of intent
Timing of check	Usually must induce the loan/release	Any issuance that bounces can qualify
Presumptions after notice	Presumption of deceit if not made good within a short statutory window (RPC)	Presumption of knowledge of insufficiency if not made good within 5 banking days
Defense of good faith	Relevant (can negate deceit)	Generally irrelevant (malum prohibitum), except statutory defenses (e.g., payment within 5 banking days)
Damage element	Required	Not required beyond the act of issuing a bad check

(Statutory wording controls the exact “notice” and “cure” periods.)

6) Elements checklist (for complainants and defenders)

To evaluate estafa via deceit (315(2)(a)):

What specific misrepresentation was made before the loan?
Did the lender rely on it? (Show the causal link.)
Is the misrepresentation provably false? (Docs, expert reports.)
What is the damage? (Unpaid principal/interest, consequential loss.)

To evaluate estafa via bouncing check to obtain loan (315(2)(d)):

Was the check issued to secure the release of money then and there?
Was it dishonored? (Bank stamp/return memo.)
Was there notice of dishonor and failure to make good within the statutory window?
Did the lender release funds because of the check? (Causation.)

To evaluate misappropriation (315(1)(b)):

Was there an entrustment (trust/commission/administration) or obligation to return/deliver specific funds/goods?
Was there conversion (used as one’s own; denial of receipt)?
Was demand made? (Not an element per se, but strong evidence of misappropriation.)
What is the damage?

7) Evidence that commonly matters

Loan file: application forms, financial statements provided, evaluation notes, approval sheet.
Communications: messages/emails showing what was represented and when.
IDs/titles/collateral papers used to induce the loan (to prove falsity).
Checks: photocopies (front/back), bank return slips, notice of dishonor and proof of receipt.
Entrustment documents: authority letters, agency agreements, trust receipts.
Proof of damage: SOA/ledger, demand letters, computation of principal, interest, penalties, opportunity losses (where provable).
Witnesses: credit officer, approving officer, notary, bank personnel.

8) Penalties and civil liability (high level)

Penalties under Art. 315 scale with the amount defrauded (amended by R.A. 10951): the higher the amount, the heavier the imprisonment range and fines. Courts also order restitution and interest as civil liability together with the criminal case.
Multiple victims/checks can mean separate counts.
Syndicated estafa (P.D. 1689)—harsher penalties—may apply when five or more persons, as a syndicate, defraud the public (e.g., sham investments).

(Exact ranges depend on current law and the amount involved.)

9) Venue, prescription, and procedure pointers

Venue: Where any essential element occurred—e.g., place of deceit, delivery of funds, issuance/deposit/dishonor of the check.
Prescription (statute of limitations): Depends on the imposable penalty (which depends on the amount). Under the RPC, prescription generally starts from discovery of the offense by the offended party/authorities (Art. 91), and typically ranges around 10 or 15 years for estafa (depending on whether the penalty is correctional or afflictive).
Procedure: File a complaint-affidavit with the prosecutor for preliminary investigation; if probable cause is found, an Information is filed; bail, arraignment, trial, judgment follow. Civil liability is ordinarily impliedly instituted in the criminal case (unless waived/reserved).

10) Defenses commonly raised (and when they work)

No deceit / good faith: Statements were honest opinions or forward-looking projections, not false facts; lender knew the risks; borrower disclosed material facts.
No entrustment (mutuum): The document is a loan, not a trust/agency; ownership of money transferred, so no misappropriation.
No causal link: Loan was already approved for other reasons; the check or statement was not what induced the release.
Check as security for pre-existing debt: Defeats RPC estafa 315(2)(d) (though B.P. 22 may still apply if statutory elements are met).
Payment/novation: Does not automatically extinguish criminal liability once estafa is complete, but restitution can mitigate penalties and satisfies civil liability.
Lack of damage: Full payment before filing (or credible proof lender suffered no loss) can negate/undercut the damage element for estafa.

11) Practical scenarios

Fake collateral play: Borrower shows a forged TCT to get ₱1M. Non-payment later supports estafa by deceit because the forged title caused the release of funds.
Security check only: Debt already existed; borrower later issues a check “as security” which bounces. No estafa under RPC 315(2)(d) (no causal deceit), but B.P. 22 might still lie.
Specific-purpose funds: Company cashier receives ₱300k “to pay BIR today” and pockets it. That’s estafa by misappropriation (315(1)(b)).
Trust receipt: Importer signs a trust receipt and sells the goods but doesn’t remit proceeds. Criminal liability can attach under P.D. 115 (treated as estafa).

12) How lenders can reduce criminal-law uncertainty

Paper the “why”: record what facts induced the loan (so you can later show reliance).
Verify documents: IDs, titles, bank proofs.
Use escrow/controlled disbursement when funds are for a specific purpose.
Send prompt, provable notices of dishonor/demand.
Compute damages carefully (principal, contractual interest, penalties, costs).

13) How borrowers can avoid criminal exposure

Disclose material risks; avoid puffery that sounds like a present fact.
Don’t use checks to “buy time” if you’re unsure you can fund them.
Keep written proof that money was a loan (mutuum), not held in trust.
If funds are for a specific purpose, segregate and account for them.
If a check bounces, respond immediately to any notice of dishonor and make good within the statutory window (this can be crucial under B.P. 22 and can blunt presumptions under the RPC).

14) FAQs

Is non-payment of an online lending app loan estafa? Usually no—it’s civil. It becomes estafa only if the loan was obtained through deceit (fake identity, fabricated documents) or if funds entrusted for a specific purpose were misused.

If I paid later, is the estafa case gone? Not automatically. Estafa is consummated once deceit/entrustment and damage occur. Payment can extinguish civil liability and mitigate sentence, and sometimes the complainant may move to dismiss, but it’s not a guaranteed bar.

Can a lender file both estafa and B.P. 22? Yes—they punish different wrongs. The same check episode can support both, provided each law’s distinct elements are met.

Final note (important)

This is a general guide based on the RPC and related laws. Specific outcomes turn on documents, timelines, notices, and facts. If you’re dealing with a live dispute, consider consulting a Philippine lawyer with your papers in hand.