Title: Online Lending App Excessive Fees and Harassment in the Philippines: A Comprehensive Legal Overview

Online lending applications have surged in popularity in the Philippines, offering quick and convenient access to loans. However, allegations of excessive fees, exorbitant interest rates, and abusive debt collection practices—including harassment—have raised significant legal and regulatory concerns. This article provides a comprehensive overview of the relevant laws, regulations, and enforcement mechanisms in the Philippines regarding online lending apps, with a focus on the issues of excessive fees and harassment.

1. Legal and Regulatory Framework for Lending in the Philippines

1.1. Lending Company Regulation

Republic Act No. 9474 (Lending Company Regulation Act of 2007): Governs the establishment and operation of lending companies in the Philippines. Under this law, lending companies are required to register with the Securities and Exchange Commission (SEC) and comply with statutory regulations concerning interest rates, fees, and fair collection practices.
Republic Act No. 8556 (The Financing Company Act of 1998): Regulates financing companies, which operate similarly to lending companies. It contains provisions on disclosure requirements and the licensing procedures enforced by the SEC.

1.2. The Role of the Securities and Exchange Commission (SEC)

The SEC is the primary regulator overseeing lending and financing companies, ensuring compliance with the relevant statutes and issuing circulars to address consumer protection issues.
SEC Memorandum Circular No. 18, Series of 2019 and related circulars outline rules to curb unfair collection practices, including confidentiality breaches and harassment.
The SEC has the authority to suspend or revoke the licenses of lending companies that fail to comply with these regulations.

1.3. The Role of the Bangko Sentral ng Pilipinas (BSP)

While the BSP primarily regulates banks and quasi-banks, it also sets general guidelines on credit operations to protect consumers from unreasonable fees and charges. However, non-bank entities (like many online lending apps) usually fall under the purview of the SEC unless they have secured other forms of licensing.

1.4. Usury Law and Interest Rates

The Philippines’ usury law (Act No. 2655) effectively became inoperative after the Monetary Board’s issuance of resolutions that removed interest rate ceilings. As a result, interest rates are generally governed by market forces and subject to contractual agreement.
However, under Philippine jurisprudence (e.g., Medel v. Court of Appeals, G.R. No. 131622, November 27, 1998), courts may declare an interest rate to be “unconscionable” and reduce it if it is found to be exorbitant or oppressive.
While there is no longer a fixed legal interest ceiling, lenders remain subject to judicial scrutiny to ensure that rates and fees do not become unjust or unconscionable.

2. Excessive Fees and Interest Rates

2.1. Common Practices by Online Lending Apps

High Processing Fees: Some apps deduct large processing fees from the principal loan amount, effectively increasing the borrower’s cost of credit.
Exorbitant Late Payment Penalties: Beyond simple interest, lenders may impose daily penalties or fees for delayed payments that quickly accumulate, often surpassing the principal amount.
Hidden Charges: Some apps may fail to disclose upfront charges or incorporate charges into the repayment structure without transparent disclosure.

2.2. Legal Considerations for Excessive Fees

Disclosure Requirements: Under the Truth in Lending Act (Republic Act No. 3765), lenders must disclose all finance charges, including interest rates and other fees, in a clear manner. Failure to do so can subject them to penalties and administrative sanctions.
Assessment of “Unconscionable” Fees: Philippine courts have the power to reduce or invalidate interest rates or fees that are deemed patently excessive. In assessing unconscionability, courts examine the circumstances of the transaction, the disparity in bargaining power, and the overall impact on the borrower.

2.3. Regulation and Enforcement by the SEC

The SEC monitors complaints against lending companies for violations such as non-disclosure of fees, imposition of excessive charges, and other unfair lending practices.
Companies found to have repeatedly violated consumer protection rules may face license suspension or revocation, fines, and possible criminal liability for responsible officers.

3. Debt Collection Harassment and Abusive Practices

3.1. Common Harassment Tactics

Excessive Contact: Continuous phone calls, text messages, or app notifications at odd hours, sometimes involving threats or insults.
Shaming and Cyber Harassment: Some lenders threaten to disclose a borrower’s personal debt information to family, friends, and employers through social media or direct messaging.
Unauthorized Use of Personal Data: Accessing a borrower’s phone contacts or sensitive information without explicit consent and using it as leverage during collection.

3.2. Relevant Laws and Regulations

SEC Memorandum Circulars on Fair Debt Collection
- These SEC circulars explicitly prohibit harassment, abusive language, threats, and contacting third parties other than those who were named as guarantors or references.
- Lending companies are required to maintain ethical standards in collection and uphold borrower privacy.
Data Privacy Act of 2012 (Republic Act No. 10173)
- This law, implemented by the National Privacy Commission (NPC), sets out rules for lawful processing of personal data.
- Consent Requirement: Lending apps must obtain informed consent for accessing phone data (contacts, photos, etc.). Using this data without permission or beyond the stated purposes (e.g., to harass or shame borrowers) can be a violation.
- Complaints to NPC: Borrowers can file complaints if their personal data is misused or if there is a breach of privacy that leads to harassment.
Revised Penal Code and Special Laws
- Harassment or coercion can also fall under criminal offenses if it involves threats, intimidation, or other forms of unlawful pressure.
- Grave Threats (Article 282, Revised Penal Code) or Unjust Vexation (Article 287, Revised Penal Code) may apply where the lending app’s collection tactics cross legal boundaries.

3.3. Enforcement and Remedies

Filing a Complaint with the SEC: Borrowers can submit evidence of abusive practices, such as screenshots of harassing messages or recordings of phone calls. The SEC may investigate and impose administrative sanctions or penalties.
Filing a Complaint with the NPC: If there is misuse or unauthorized disclosure of personal data, the NPC can conduct a compliance check, order cease-and-desist actions, and impose fines.
Civil and Criminal Actions: Borrowers can file civil suits to seek damages for harassment or file complaints with law enforcement if the conduct rises to the level of criminal offense.

4. Practical Steps for Borrowers Facing Harassment or Excessive Fees

Gather Evidence
- Save messages, call logs, screenshots, or other evidence documenting the lender’s abusive or harassing conduct.
- Note any undisclosed fees or suspicious charges in billing statements.
Submit a Formal Complaint
- To the SEC: For violations of fair debt collection and lending regulations.
- To the NPC: For data privacy breaches, unauthorized use of contacts, or public shaming campaigns.
Consider Legal Assistance
- Consult a lawyer or approach legal aid organizations (e.g., the Public Attorney’s Office, Integrated Bar of the Philippines) to evaluate possible civil or criminal remedies.
Engage in Dialogue (When Safe)
- If the lender’s communication remains reasonable, attempt to negotiate a restructuring or settlement of the debt to avoid prolonged conflict.
- However, borrowers should never tolerate illegal threats, harassment, or privacy breaches.
Stay Informed
- Keep updated with SEC advisories or circulars about licensed and unlicensed lending companies.
- Check for consumer protection notices from the SEC and NPC regarding problematic apps.

5. Regulatory Responses and Ongoing Developments

The SEC has been increasingly active in cracking down on unregistered online lending apps and unscrupulous lending companies. Enforcement actions include suspension or revocation of operating licenses and legal action against violators.
The NPC has released statements reminding online lending companies about data privacy obligations and has taken action against companies found guilty of violating borrower privacy.
There are ongoing legislative initiatives to further clarify and strengthen debt collection and data privacy regulations, especially in the digital lending context.

6. Conclusion

Online lending apps offer valuable financial services—particularly for those in need of quick credit—but they must operate within the bounds of Philippine law. The imposition of excessive fees, exorbitant interest, and the use of harassing or abusive collection practices are strictly prohibited by the regulatory framework, including laws enforced by the SEC and the NPC. Borrowers who experience such misconduct have multiple avenues for recourse, from filing complaints to pursuing civil and criminal actions.

As technology and lending practices evolve, regulators continue to refine rules and ramp up enforcement to protect consumers. Staying informed of these developments and understanding one’s legal rights are crucial for anyone who uses or intends to use online lending services in the Philippines.