1) Why “unfair charges” disputes happen with online lending apps
Online lending apps (often called OLAs) typically use standard-form, click-through contracts and automated fee computation. Disputes usually arise when:
- the borrower did not clearly see (or was not clearly told) the full finance charges;
- the app adds late fees, penalty interest, collection fees, or “service fees” that balloon the balance;
- payments are misapplied (credited late, credited to fees first, or not reflected at all);
- the lender changes terms midstream or computes interest in a way that doesn’t match what was disclosed; or
- the app (or its collectors) uses pressure tactics to force payment of charges that are legally questionable.
In Philippine law, disputing unfair charges is mainly about two things:
- Contract + Civil Code rules (what is actually demandable), and
- Disclosure and consumer protection rules (what must be clearly disclosed, and how lenders must treat consumers).
2) What counts as “unfair charges” in practical legal terms
“Unfair” can mean different things, and the correct legal approach depends on which category applies:
A. Charges that were never validly agreed to
Examples:
- interest or fees that were not part of the loan terms you accepted;
- “collection fees” imposed even when no court action exists and no valid basis is shown;
- fees added by a third-party collector with no authority from the lender.
B. Charges that may be unenforceable or reducible even if written
Examples:
- unconscionable interest rates (oppressive or shocking to the conscience);
- excessive penalty charges and late fees that pile up rapidly;
- double-charging (penalty + default interest + “processing fee” for the same delay).
Philippine courts can reduce iniquitous penalties and can temper unconscionable interest and charges.
C. Charges that were not properly disclosed
Even where you clicked “agree,” the lender may still have legal exposure if finance charges were not clearly disclosed as required by disclosure laws and consumer protection standards (especially where effective rates and total costs are obscured).
D. Charges resulting from errors, misposting, or identity/authorization problems
Examples:
- payment not posted;
- loan shown as unpaid despite full payment;
- unauthorized loan or account takeover.
These are disputed as factual/evidentiary issues and often require a strong paper trail.
3) The key Philippine legal rules you rely on when disputing charges
A. Civil Code: interest and charges in loans
1) Interest must be expressly stipulated in writing
Under the Civil Code (Art. 1956), no interest is due unless expressly stipulated in writing. This is a powerful point in many informal or poorly documented loans—though OLAs often try to satisfy “writing” through electronic contracts and recorded acceptance.
2) Penalty clauses can be reduced
Courts may equitably reduce penalties that are iniquitous or unconscionable (Civil Code Art. 1229), even if the contract states them.
3) When you’re in delay, legal interest may apply as damages
If the obligation is a sum of money and the debtor is in delay, damages are generally in the form of interest—either the stipulated rate or, if none is enforceable, the legal interest applied by courts under Civil Code principles and prevailing jurisprudence (with the rate guided by applicable BSP/Supreme Court rules).
4) Contract terms are not absolute
Even though parties may stipulate terms (Civil Code Art. 1306), stipulations contrary to law, morals, good customs, public order, or public policy are not enforceable. OLA contracts are often treated as contracts of adhesion, so ambiguous terms tend to be construed against the drafter.
B. Truth in Lending Act (RA 3765): disclosure of finance charges
RA 3765 requires lenders in covered credit transactions to provide clear disclosures of finance charges and the true cost of credit. If fees and interest are hidden, misleading, or not properly disclosed, that supports:
- complaints to regulators (where applicable), and
- defenses or claims in court challenging the enforceability of certain charges.
C. Financial consumer protection standards (RA 11765)
The Financial Products and Services Consumer Protection Act emphasizes:
- transparent disclosure,
- fair treatment,
- responsible pricing and conduct, and
- accessible complaints handling.
This is especially useful when disputing:
- unclear fee stacking,
- abusive add-ons,
- refusal to provide itemized statements, or
- unfair collection practices used to coerce payment of disputed charges.
D. Data Privacy Act (RA 10173): when the dispute overlaps with “debt shaming”
If the app or collectors used your personal data (contacts, workplace info, social media) to pressure you, the dispute can extend beyond charges into unlawful processing/disclosure. While this does not automatically erase the debt, it can support:
- regulatory complaints and orders to stop unlawful processing,
- damages claims in proper cases, and
- leverage to compel a fair recomputation and proper dispute handling.
E. SEC regulation (common for lending/financing OLAs)
Many OLAs operate through lending companies/financing companies that are commonly under SEC oversight. SEC rules and enforcement actions have historically targeted abusive collection and unregistered/unauthorized OLA operations. This matters because an unfair-charges dispute is often inseparable from whether the provider is properly registered and whether its practices comply with SEC standards.
4) Before you dispute: build the “record” that wins disputes
Successful disputes are document-driven. Before writing to anyone, assemble:
A. Contract and disclosures
- Screenshot or export the loan summary and terms and conditions at the time you borrowed.
- Obtain the promissory note or loan agreement (if provided).
- Capture any truth-in-lending disclosures shown in-app or emailed.
B. Loan computation documents
Ask for:
- Statement of Account (SOA): principal, interest, fees, penalties, and balances.
- Amortization schedule or repayment plan.
- Full transaction ledger showing how each payment was applied.
C. Proof of payments
- e-wallet receipts, bank transfer confirmations, OTC payment slips,
- reference numbers, timestamps,
- screenshots of “successful payment” screens.
D. Collection communications
- SMS, emails, chat logs,
- call logs (date/time),
- threats or pressure messages (especially if they misstate the law).
Organize everything chronologically. Most disputes are won by showing (1) what was disclosed, (2) what was charged, and (3) how the charges diverge.
5) Do your own recomputation (the borrower’s “position paper”)
A lender’s system-generated balance is not automatically correct. Your goal is to produce a clear undisputed vs disputed breakdown:
A. Identify the “undisputed amount”
Usually:
- principal actually received, plus
- the interest/fees that were clearly disclosed and validly agreed upon (and not unconscionable).
B. Identify each “disputed charge” and its legal basis
Typical disputed items and legal hooks:
- Interest not properly agreed/disclosed
- Dispute: “Interest/fees not clearly disclosed or not validly stipulated.”
- Hook: Civil Code Art. 1956 + RA 3765 disclosure principles.
- Excessive penalties / late fees / default interest
- Dispute: “Penalty and late-fee stack is iniquitous/unconscionable.”
- Hook: Civil Code Art. 1229 (penalty reduction) + unconscionability doctrine.
- Collection/attorney’s fees imposed without basis
- Dispute: “No court action; no proof of expense; not demandable as an automatic add-on.”
- Hook: Civil Code rules on damages and attorney’s fees; courts scrutinize these closely.
- Misapplied or uncredited payments
- Dispute: “Payment posted late/not credited; recompute balance.”
- Hook: obligation extinguished by payment; burden on lender to account properly once you show proof.
- Unilateral changes (e.g., rate or fees changed after loan release)
- Dispute: “No valid consent to modified pricing.”
- Hook: consent + transparency requirements; contract principles.
Make your recomputation easy to understand: a one-page summary plus supporting screenshots.
6) Step-by-step dispute process (Philippine context)
Step 1: Make a written dispute to the lender (not just chat support)
Start with a formal written complaint sent through every available channel:
- in-app ticket,
- official email,
- registered address (if practical),
- and keep copies/screenshots.
Your dispute letter should request:
- A complete itemized Statement of Account and ledger,
- The basis for every fee and penalty (contract clause + computation),
- A recomputation excluding disputed items,
- A freeze on additional penalties while the dispute is pending (or at least a clear explanation why not), and
- Confirmation of the lender’s registered entity name (not just the app brand) and regulator (often SEC).
Core structure (content checklist):
- Loan reference number; date released; amount received; due dates
- List of payments made with proof references
- Table of disputed charges (what, how much, why disputed)
- Legal anchors: Civil Code interest/penalty rules; disclosure obligations (RA 3765); fair treatment (RA 11765)
- Clear demand: recompute and correct within a fixed period (e.g., 7–15 days)
Step 2: Pay the undisputed amount strategically (when appropriate)
If you have the ability to pay some amount, consider:
- paying the undisputed principal (or undisputed installment) and clearly labeling it (e.g., “payment for principal/undisputed amount”),
- keeping proof that you tendered payment but disputed the excess.
This can reduce the risk that the lender claims you acted in bad faith and can limit balance ballooning. The correct strategy depends on your facts (especially if the lender refuses to accept partial payment), but the principle is: document that you are disputing charges, not simply evading repayment.
Step 3: Demand proper accounting; refuse “pressure settlements” that waive rights
Collectors may push you to sign a “settlement” or “undertaking” that:
- acknowledges the inflated balance,
- waives complaints,
- authorizes contact-blasting, or
- agrees to sweeping fees.
Treat these as new contracts. Do not sign anything that “ratifies” disputed charges unless the recomputation is acceptable.
Step 4: If a third-party collection agency is involved, require proof of authority
Ask the collector (in writing) for:
- the name of the principal (lender entity),
- proof they are authorized to collect (endorsement/authority letter), and
- a copy of the SOA from the lender.
You can insist that all communications be in writing and that the collector stop contacting third parties.
Step 5: Escalate to the correct regulator (SEC / BSP / others, depending on the provider)
Your complaint is stronger when directed to the proper regulator:
- SEC route: commonly applicable if the operator is a lending company or financing company using an app channel.
- BSP route: if the provider is a bank, digital bank, EMI, or BSP-supervised financial institution (or operating through one).
- NPC route (Data Privacy Act): if the dispute involves contact blasting, unlawful disclosure, or misuse of personal data.
What to include in a regulatory complaint:
- your dispute letter and lender’s response (or lack of response),
- SOA and your recomputation,
- screenshots showing disclosed vs charged fees,
- proof of payments,
- threatening or misleading collection messages (especially those claiming arrest for debt or using shame tactics),
- the app name and the legal entity behind it (as best as you can document).
Regulators generally respond better to complaints framed as:
- failure to disclose finance charges properly,
- unfair fee stacking,
- refusal to provide accounting,
- abusive conduct used to force payment of disputed amounts.
Step 6: Use barangay conciliation when applicable (and tactically useful)
For disputes between individuals residing in the same city/municipality (and not falling under exceptions), Katarungang Pambarangay procedures may be required before filing certain cases. Even when not strictly required, barangay mediation can sometimes produce a written settlement with recomputed amounts—useful if both sides want a quick resolution.
Step 7: Court options when the lender refuses recomputation
Court routes depend on whether you are defending or initiating:
A. If the lender sues you (collection case / small claims where applicable)
Raise defenses such as:
- incorrect computation,
- lack of proper disclosure,
- unconscionable interest,
- excessive penalties subject to reduction,
- misapplied/uncredited payments.
Ask the court to:
- require the lender’s accounting and ledger,
- reduce penalties and unconscionable charges,
- enforce only lawful interest/fees.
B. If you sue (refund / overpayment / damages / accounting)
Possible civil claims (depending on facts) include:
- recovery of overpayment,
- damages for unlawful acts,
- action requiring accounting/reformation of the obligation,
- claims anchored on unlawful collection conduct (if present).
C. Tender of payment and consignation (advanced remedy)
If you are ready to pay what is truly due but the lender refuses unless you pay disputed charges, Civil Code remedies on tender of payment and consignation can, in the right case, stop further delay consequences by depositing the amount in accordance with legal requirements. This is technical and documentation-heavy, but it exists specifically to prevent a creditor from weaponizing refusal.
7) Common lender arguments—and how disputes answer them
“You agreed when you clicked ‘I accept.’”
Click acceptance can prove consent, but it does not automatically immunize:
- unclear or misleading disclosures,
- unconscionable pricing,
- penalty stacking that courts reduce,
- fees not actually shown or properly explained.
“There’s no usury law, so any interest is allowed.”
Even without strict ceilings, courts still reduce unconscionable interest and iniquitous penalties, and disclosure rules still apply.
“We can charge collection fees/attorney’s fees.”
Such fees are not automatically demandable just because a spreadsheet says so. Courts scrutinize these. If no litigation exists, “attorney’s fees” as a routine add-on is legally vulnerable.
“Pay now or we will file a criminal case.”
Non-payment of debt is generally civil. Criminal exposure usually requires separate wrongdoing (fraud, falsification, bouncing checks). Threats of arrest for mere non-payment are a major red flag.
8) Special problem patterns with OLAs (and how to dispute them)
A. “Add-on interest” disguised as a lower monthly rate
Some apps quote a monthly rate that sounds modest but apply add-on computations and fees that produce a much higher effective cost. Dispute by demanding:
- total finance charge disclosure,
- effective rate / total repayment amount,
- full ledger showing how interest was computed.
B. Fee stacking after default
Common stack:
- late fee + penalty interest + default interest + “service fee” + “collection fee”
Challenge as:
- duplicative and punitive beyond what is equitable,
- reducible under Civil Code Art. 1229,
- potentially unconscionable.
C. “Payment not reflected”
Dispute by:
- presenting proof with transaction reference numbers,
- demanding ledger correction,
- insisting on a written confirmation of updated balance.
D. Rollover/refinancing traps
Apps may offer “extend” options that effectively capitalize charges. Dispute by:
- requiring a full breakdown of what portion is principal vs fees,
- refusing to sign undertakings that admit inflated balances without recomputation.
E. Unlicensed / dubious apps
If the operator’s identity and registration are unclear, disputes should still focus on:
- proof of principal actually received,
- invalidity of undisclosed charges,
- reporting to regulators for unauthorized operations and abusive conduct.
9) Practical drafting points for a strong dispute letter
A dispute letter is strongest when it is:
- specific (exact amounts, dates, and screenshots),
- structured (undisputed vs disputed),
- law-anchored (Civil Code interest/penalty rules; disclosure requirements; fair treatment),
- outcome-focused (recompute; correct; confirm; stop adding charges while pending),
- calm (avoid emotional language; stick to facts and legal points).
A simple but effective demand line:
- “I dispute the imposition of [specific charges] for lack of proper disclosure/valid stipulation and as unconscionable/iniquitous. Please provide a full itemized SOA and recompute within [X] days. I am prepared to pay the undisputed amount upon issuance of a corrected SOA.”
10) What disputing unfair charges does not do automatically
- It does not automatically erase the principal obligation if the loan is valid.
- It does not stop a lender from attempting civil collection.
- It does not prevent credit reporting if the lender participates in credit reporting systems (though inaccurate reporting can be separately disputed).
What it does do—when properly documented—is create a record that:
- undermines inflated computations,
- supports regulatory action,
- strengthens your defenses if sued, and
- improves the chance of a lawful recomputation and settlement.
11) Summary
Disputing unfair charges from online lending apps in the Philippines is a documentation-and-law exercise: get the contract and disclosures, demand a full itemized accounting, recompute the balance by separating undisputed principal from disputed fees, invoke Civil Code rules on interest and penalty reduction, and escalate to the appropriate regulator (often SEC, sometimes BSP, and NPC where privacy abuse is involved). Courts can reduce unconscionable interest and iniquitous penalties and will require lenders to prove their computation, especially when borrowers present organized proof and a coherent recomputation.