Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. For specific concerns about your situation, it is advisable to consult a qualified lawyer or seek legal assistance from the appropriate government office in the Philippines.

Introduction

With the rise of financial technology (fintech) in the Philippines, online lending apps have become increasingly popular. These platforms allow borrowers quick access to credit through their smartphones or computers. However, disputes can arise—ranging from hidden charges, abusive collection practices, or the lender’s failure to follow what was agreed upon—leading to a potential breach of contract.

One accessible legal remedy for monetary disputes not exceeding a certain amount is to file a small claims case before a Philippine court. This article provides an overview of how to file a small claims case for breach of contract against online lending apps within the Philippine legal system.

1. Understanding Breach of Contract in the Context of Online Lending

1.1 What Is a Breach of Contract?

A breach of contract occurs when one party fails or refuses to fulfill their obligations as stipulated in a valid agreement. In the context of online lending apps, examples of possible breaches include:

Imposing undisclosed fees or charges not specified in the agreement.
Altering interest rates or repayment terms unilaterally and without proper notice.
Failing to disburse approved loan amounts on time (if that was explicitly agreed upon).
Unauthorized or illegal collection practices, such as harassment, defamation, or threats that violate the terms of the agreement or existing laws.

1.2 Elements of a Breach of Contract Claim

To establish a breach of contract, you typically need to show:

Existence of a valid contract – e.g., loan agreement, terms and conditions you agreed to on the app.
Violation or failure to perform by one party – the specific act or omission that constitutes the breach.
Damage or injury – a demonstrable loss or harm resulting from the breach.
Causation – a direct link between the breach and the damage incurred.

2. What Are Small Claims Cases?

2.1 Definition and Purpose

Small claims cases are governed by the Revised Rules on Small Claims Cases (A.M. No. 08-8-7-SC, as amended). These rules provide a simplified and expedited process to resolve monetary claims. Lawyers are generally not allowed to represent parties in small claims hearings (though they may assist in preparation of documents). This rule intends to reduce litigation costs and speed up the resolution of minor monetary disputes.

2.2 Jurisdictional Amount

Under the latest amendments, the maximum amount that can be claimed under a small claims case is ₱400,000 (for Metropolitan Trial Courts, Municipal Trial Courts in Cities, Municipal Trial Courts, and Municipal Circuit Trial Courts). If your monetary claim arising from the breach of contract with an online lending app does not exceed this threshold, you may file a small claims case.

3. Pre-Filing Considerations

3.1 Check the Terms of the Loan Agreement

Review the contract or terms of service in detail. Take note of clauses pertaining to interest, fees, penalties, and dispute resolution.
Ensure that the alleged breach (e.g., excessive fees or harassment) is clearly prohibited or is inconsistent with what the contract provides.

3.2 Attempt Amicable Settlement or Send a Demand Letter

Although not strictly required in every scenario, it is often good practice to send a formal demand letter to the online lending app or attempt an amicable settlement first. This can:

Give the other party a chance to rectify the breach.
Serve as evidence that you tried to resolve the issue amicably, which can be beneficial when presenting your case.

3.3 Gather Evidence

Document all communications with the lending app (emails, chat messages, screenshots, etc.).
Secure app screenshots or terms of service showing the original terms agreed upon.
Keep receipts and proofs of payment (if applicable).
If there are harassing calls or messages, record details (date, time, content).

4. Step-by-Step Procedure for Filing a Small Claims Case

Determine the Appropriate Court
- File your case in the Metropolitan Trial Court, Municipal Trial Court in Cities, Municipal Trial Court, or Municipal Circuit Trial Court where you or the online lending app’s representative resides or does business, or where the contract was executed.
Accomplish the Required Forms
- Obtain a copy of the Statement of Claim (SOC) form and other small claims forms from the Office of the Clerk of Court or download (if available) from the Supreme Court’s website.
- The statement of claim must include:
  - Your personal information (name, address, contact number).
  - The name and address of the online lending app’s representative or registered office in the Philippines.
  - A brief statement of the circumstances constituting the breach.
  - The exact amount of claim (including interests and costs, if any).
Prepare Supporting Documents
- Attach all relevant documentary evidence (the loan agreement or terms and conditions, copies of communications, receipts).
- Affidavits of witnesses (if there are witnesses to the breach or harassment).
- Each document must be properly marked and organized.
Notarize and Verify
- The Statement of Claim must be verified (signed under oath) and must include a Certification Against Forum Shopping.
- Ensure each attached affidavit is subscribed and sworn to before a notary public or other authorized officials.
Pay the Filing Fees
- The filing fees for small claims cases are relatively minimal compared to regular court cases. The exact amount depends on the value of your claim.
- You will pay these fees at the Office of the Clerk of Court.
File the Case
- Submit the Statement of Claim and attached documents (with sufficient copies for the court and for each defendant) at the Office of the Clerk of Court.
- Once filed, the court will issue a summons or notice of hearing to the defendant (the online lending app or its authorized representative).
Await the Hearing Date
- Under the small claims rules, a hearing date is usually set within a short period from filing (often within 30 days).
- The defendant is required to submit a Response or will present their side on the date of the hearing.
Attend the Hearing
- On the scheduled date, appear personally before the judge or court-designated officer.
- Bring original copies of all evidence and be ready to present your claims clearly.
- The judge will conduct clarificatory questions to both parties. Mediation can sometimes be conducted in-court to encourage settlement.
- No lawyers are allowed to appear in behalf of the parties (except if the lawyer is the party himself or herself).
Judgment
- The court will render a decision on the same day of the hearing whenever practicable, or soon thereafter.
- If the court rules in your favor, the decision will indicate the amount the online lending app is ordered to pay, including any awarded damages, interest, or costs.
Execution of Judgment

If the online lending app does not comply with the decision voluntarily, you may move for the execution of the judgment.
This involves the court issuing a writ of execution to enforce the payment.

5. Frequently Asked Questions

5.1 Can I Include Claims for Damages Other than the Loan Amount?

Yes, you can include actual damages, interests, and costs so long as your total monetary claim does not exceed ₱400,000. However, small claims courts do not entertain purely non-monetary claims (like injunctions or orders to stop a particular act).

5.2 What If the Online Lending App Is Not Registered in My City?

You may file in the court where you reside, or where any part of the cause of action occurred, provided that the lending app has a presence or does business in the Philippines (often, they have a registered office address). Otherwise, consult a lawyer on how best to proceed, as jurisdictional rules can be complex.

5.3 Do I Need a Lawyer?

Small claims proceedings are designed to be user-friendly, and parties generally must appear without counsel. However, you may seek legal advice when preparing your Statement of Claim or gathering evidence.

5.4 What If My Claim Exceeds ₱400,000?

If your total claim surpasses ₱400,000, you cannot use the small claims process. You will have to file an ordinary civil action (regular procedure) for breach of contract, which typically requires a lawyer and follows lengthier court processes.

5.5 Can I File a Complaint with the SEC or Other Government Agencies?

If you believe the online lending app violates lending laws or commits harassment or unfair collection practices, you may also file a complaint with the Securities and Exchange Commission (SEC) or the Department of Trade and Industry (DTI) if consumer protection issues are involved. However, these administrative complaints do not usually result in a money judgment for the complainant; they focus on penalizing or regulating the erring company.

6. Tips for Success

Keep Thorough Records
- Save all written communications and screenshots to establish a clear paper trail.
Be Clear and Concise
- In your Statement of Claim, provide a straightforward summary of facts and the exact breach committed.
Prepare for the Hearing
- Review your evidence and be ready to explain each piece logically and chronologically.
Arrive Early and Be Respectful
- Show respect to the court and the opposing party. Present your case calmly and logically.
Stay Updated
- Keep track of new issuances from the Supreme Court regarding small claims, as rules can change over time.

Conclusion

Filing a small claims case for breach of contract against an online lending app in the Philippines is a viable option if your monetary claim does not exceed ₱400,000. By following the simplified rules, you can represent yourself, reduce legal fees, and seek swift adjudication of your claim. Always remember to gather and organize your evidence, draft your claim carefully, and comply with court requirements.

Should you find the legal process too complex or if your claim exceeds the small claims threshold, consulting a legal professional is highly recommended. Additionally, if the online lending app engages in unlawful or unfair practices, you may also explore filing administrative complaints with relevant government agencies such as the SEC or DTI.

References

A.M. No. 08-8-7-SC (Re: Rule of Procedure for Small Claims Cases, as Amended)
Civil Code of the Philippines
Securities and Exchange Commission (SEC) Regulations on Lending Companies and Financing Companies
Relevant Supreme Court Circulars on Small Claims Procedures

This article is for informational purposes only and does not replace personalized legal counsel.