Letter to the Lawyer

Dear Attorney,

I am writing to seek legal advice regarding a troubling experience I had with an unregistered lending entity. I initially sought a loan from this entity, which I later discovered is not registered with the Securities and Exchange Commission (SEC). Since then, I have been subjected to harassment and intimidation, with threats of being reported to other lending platforms or being listed as a delinquent borrower.

I want to understand my legal rights and the possible remedies I can pursue under Philippine law. Specifically, I would like to know how to address this harassment, how to deal with potential negative consequences they might attempt to impose, and what actions I can take against them for operating illegally. I also want to protect myself from further exploitation.

Thank you for your assistance, and I look forward to your response.

Sincerely,
A Concerned Borrower

Legal Analysis: Understanding Your Rights and Remedies Against Harassment by Unregistered Lending Entities in the Philippines

In the Philippines, the legal framework governing lending activities, debt collection, and consumer protection is robust. Your situation involves multiple legal dimensions, including the regulation of lending companies, unlawful debt collection practices, and remedies for harassment. Below, I will provide a detailed analysis of these areas.

1. Regulation of Lending Entities in the Philippines

Under Philippine law, lending entities are strictly regulated to protect borrowers from predatory practices.

Registration with the SEC

The Lending Company Regulation Act of 2007 (Republic Act No. 9474) requires all lending companies to be registered with the Securities and Exchange Commission (SEC) and obtain a Certificate of Authority to Operate as a Lending Company. This law aims to ensure transparency and accountability in lending operations.

Penalty for Operating Without SEC Registration
- Lending companies operating without SEC registration are considered illegal. Such entities may face criminal, civil, and administrative sanctions.
- Under Section 12 of RA 9474, unregistered entities are liable for imprisonment of up to six months or a fine of up to PHP 50,000, or both.

Rights of Borrowers

Borrowers are entitled to transparency regarding loan terms and conditions. Unregistered entities often bypass these requirements, leading to unfair terms and practices.

2. Unlawful Debt Collection Practices

Applicable Laws

Debt collection practices are governed by:

Republic Act No. 10173 (Data Privacy Act of 2012)
BSP Circular No. 1133, Series of 2021 (Rules on Fair Debt Collection Practices)
SEC-issued guidelines.

Prohibited Practices

Lenders and debt collectors are prohibited from:

Using or threatening violence or other criminal means.
Making defamatory or false statements about a borrower.
Publicly disclosing a borrower’s debt to shame them.
Contacting a borrower’s family, employer, or other third parties without consent.

The actions you described—harassment and threats to list you as delinquent on other platforms—are clear violations of these laws.

3. Harassment and Remedies

Harassment Defined

Harassment includes persistent, oppressive, or unreasonable actions aimed at intimidating a borrower. Threatening to harm a borrower’s reputation or using unlawful means to collect a debt constitutes harassment.

Legal Remedies

You can take the following actions:

Report to the SEC File a complaint with the SEC’s Enforcement and Investor Protection Department. The SEC has a dedicated task force to investigate illegal lending activities.
File a Complaint with the National Privacy Commission (NPC) Under the Data Privacy Act, unauthorized sharing of your personal information or threats to disclose your debt to others is a violation. File a complaint with the NPC for breaches of your data privacy rights.
Criminal Charges
- Grave Coercion (Article 286, Revised Penal Code): If threats are used to compel you to pay under duress, the lender may be charged.
- Slander or Libel (Articles 353-355, RPC): Defamatory threats to your reputation are punishable under the law.
Civil Action for Damages File a case for moral and exemplary damages under Article 19 of the Civil Code, which enshrines the principle of human dignity and fair dealing.
Seek Assistance from Regulatory Bodies
- Bangko Sentral ng Pilipinas (BSP): If the lender is under BSP supervision, report violations to its Consumer Assistance Mechanism.
- Department of Justice (DOJ): The DOJ can prosecute violations of laws related to lending.

4. Enforcement Against Unregistered Entities

SEC Crackdown

The SEC actively cracks down on unregistered and abusive lending companies. In 2019, it issued Memorandum Circular No. 18, which provides stringent penalties for abusive collection practices, including revocation of licenses.

Operation of Online Lending Platforms

Many unregistered entities operate online. In response, the SEC has increased monitoring and shut down illegal lending apps. It encourages borrowers to verify the registration status of lending platforms before transacting.

5. Filing a Complaint: Step-by-Step

Gather Evidence
- Save all communication, including text messages, emails, or screenshots of harassment.
- Document instances of threats or unauthorized disclosures.
File a Complaint
- To the SEC: Submit a written complaint with evidence.
- To the NPC: Use the NPC online portal for data privacy violations.
- To Local Law Enforcement: Report threats or coercion.
Consult a Lawyer A lawyer can help draft complaints, file legal cases, and represent you in proceedings.

6. How to Protect Yourself

Know Your Rights

Borrowers have the right to:

Be treated fairly and respectfully.
Access clear and accurate loan information.
Refuse unauthorized sharing of personal data.

Avoid Further Engagement

Avoid responding to threats or engaging with unregistered entities. Focus on formal remedies.

7. Conclusion

Your situation highlights the risks associated with transacting with unregistered lending entities. Philippine law provides robust protections for borrowers, emphasizing transparency, fairness, and respect for personal dignity. By taking appropriate legal steps, you can address the harassment and hold the offending entity accountable.

Seek legal assistance promptly to maximize your protection and remedies. Your proactive stance will not only protect you but also contribute to the fight against illegal and predatory lending practices.