Small Claims for Debt in the Philippines: Addressing Excessive Fees and Harassment
A Comprehensive Legal Overview

1. Introduction

In the Philippines, small claims cases have become an increasingly popular mechanism for creditors and debtors to resolve monetary disputes promptly and cost-effectively. The Supreme Court, through the Revised Rules of Procedure for Small Claims Cases (A.M. No. 08-8-7-SC, as amended), has established a simplified framework designed to expedite litigation and reduce legal expenses. However, issues such as excessive interest or fees and debtor harassment by collection agencies or unscrupulous creditors can arise. This article discusses the legal context of small claims, examines common problems related to excessive charges and harassment, and explains what recourse parties have under Philippine law.

2. Legal Framework for Small Claims in the Philippines

2.1. Governing Rules

The principal legal authority for small claims cases in the Philippines is the Revised Rules of Procedure for Small Claims Cases, promulgated by the Supreme Court under A.M. No. 08-8-7-SC (as amended). These rules aim to:

Simplify procedure in civil cases involving claims up to a certain monetary ceiling.
Reduce litigation costs by eliminating the need for lawyers in court representation.
Expedite resolution through summary hearings.

2.2. Jurisdiction and Coverage

Monetary Limit: As of the latest amendments, the small claims court can hear cases where the amount of the principal claim does not exceed ₱1,000,000 (subject to any current or future modifications by the Supreme Court).
Nature of Claims: Small claims actions cover purely money claims arising from:
- Contract of lease
- Contract of loan or other credit accommodations
- Contract of services
- Contract of sale
- Damages from the enforcement of these contracts
Exclusions: The procedure does not apply to actions seeking relief other than payment or reimbursement of a sum of money (e.g., ejectment, specific performance, etc.).

2.3. No Lawyers in Hearings

The rules specifically disallow lawyers from representing either party during the hearing (though parties may consult lawyers before or after the hearing). This is intended to reduce costs and focus on the factual and equitable aspects of the dispute.

3. Filing a Small Claims Case

3.1. Where to File

Small claims cases are filed with the Metropolitan Trial Courts (MeTC), Municipal Trial Courts in Cities (MTCC), Municipal Trial Courts (MTC), or Municipal Circuit Trial Courts (MCTC), depending on the location of the defendant or where the cause of action arose.

3.2. Requirements

Verified Statement of Claim (Form): The Supreme Court provides standard forms to be filled out by the plaintiff. The statement must include:
- Details of the claim (amount, basis, relevant dates, etc.)
- Evidence or attachments (receipts, contracts, promissory notes, communications)
- Certification against forum shopping
Payment of Docket Fees: The filing fee for small claims is usually more affordable than for ordinary civil actions. The exact amount depends on the principal claim. While relatively low, the fees should be checked at the time of filing since court fee schedules can be updated.

3.3. Summons and Response

Once filed, the court issues a summons requiring the defendant to appear on the scheduled hearing date and/or to file a response or a counterclaim (if applicable). The defendant may also fill out a standardized response form provided by the court.

3.4. Hearing and Judgment

One-Day Hearing: The court will typically hold a hearing within a short timeframe (often within 30 days of filing).
Simplified Process: No formal rules of evidence are strictly observed—parties present their sides, documents, and witnesses briefly.
Finality of Judgment: In small claims, the decision of the judge is final, executory, and unappealable, except on limited grounds such as grave abuse of discretion.

4. Excessive Fees, Interests, and Charges

Although the small claims process itself is designed to be cost-efficient, disputes often arise because creditors demand amounts significantly higher than the principal debt—often in the form of excessive interests, penalties, or miscellaneous charges. Here are key points to consider:

Legal Interest Rates:
- The Supreme Court, in landmark cases and circulars, has set 6% per annum as the prevailing legal interest rate on monetary judgments (absent a stipulated rate or if the stipulated rate is found to be excessive).
- For credit card debts and other consumer loans, Bangko Sentral ng Pilipinas (BSP) regulations may also apply, reminding lenders to keep interest rates and fees reasonable.
Usury Law and BSP Circulars:
- Although the Usury Law is effectively suspended, there is still a standard of reasonableness for interest rates. Courts may void or reduce usurious or unconscionable rates.
- Borrowers can challenge charges that are manifestly excessive, arbitrary, or not stipulated in the contract.
Penalties and Other Fees:
- Penalty charges must be provided for in the loan or credit agreement. Even if stipulated, the court can reduce penalty charges if deemed iniquitous or unconscionable under Article 1229 of the Civil Code.
Challenging Excessive Fees in Small Claims Court:
- During the small claims hearing, a defendant may raise the defense that the creditor’s claimed amount includes fees and interest that are excessive.
- Defendants should present documentary proof (loan agreements, demand letters, etc.) and cite relevant legal provisions on reasonable interest rates to persuade the court to reduce or disallow unreasonable charges.

5. Harassment and Unfair Collection Practices

5.1. Common Forms of Harassment

Threatening or Abusive Language: Repeated threats of legal action or derogatory language used to pressure debtors.
Public Shaming: Posting debtor’s personal information online or sending notices to neighbors, employers, or relatives.
Multiple, Aggressive Calls or Visits: Excessive calls or intimidating home or workplace visits.

5.2. Legal Protections against Harassment

Revised Penal Code (RPC) Provisions:
- Harassment that amounts to acts of lasciviousness, grave threats, or unjust vexation (Article 287 of the RPC) may be grounds for criminal liability.
Civil Code Provisions:
- Under general principles, a person who suffers moral damages or harassment can file a separate civil action for damages.
BSP and SEC Regulations for Lending Companies:
- Banks, lending companies, and financing companies must follow specific guidelines prohibiting unfair debt collection practices.
- The BSP and the Securities and Exchange Commission (SEC) have issued reminders to regulated entities that intimidation, false representations, and public shaming can lead to sanctions or license revocations.

5.3. Remedies for Victims of Harassment

Filing a Complaint with the appropriate regulatory agency (BSP, SEC, or if applicable, the Department of Trade and Industry) if the creditor is a regulated financial institution or lending company.
Seeking Protection Orders or filing a criminal complaint if the harassment escalates to threats or coercion.
Initiating a Separate Civil Action: If there is significant emotional or reputational injury, a debtor may consider a civil case for damages under Articles 19, 20, 21, and 26 of the Civil Code (regarding abuse of rights and protection of dignity/privacy).

6. Strategies for Debtors and Creditors

6.1. For Debtors

Review All Documents: Check the original loan agreement or contract to verify the interest rate, penalties, and due dates.
Gather Evidence of Harassment: Keep records of abusive calls, texts, or messages, and document any improper collection methods.
Exercise the Right to Defend: In the small claims hearing, present a clear and concise defense regarding any excessive charges.
Seek Advice: While lawyers cannot represent parties in court for small claims, consulting a lawyer or paralegal beforehand can clarify legal rights.

6.2. For Creditors

Comply with Applicable Regulations: Ensure the interest rates, penalties, and charges are justifiable, lawful, and properly documented.
Avoid Harassing Conduct: Observe ethical debt collection practices—excessive or abusive methods can backfire and lead to legal consequences.
Prepare Accurate Records: Submit well-organized evidence of the loan agreement, payment history, and itemization of fees or interest.
Pursue Amicable Settlement: Small claims court encourages settlement. Consider reaching an acceptable payment plan to avoid prolonged disputes.

7. Enforcement of the Small Claims Judgment

After the court renders a judgment in a small claims case, the losing party must pay the awarded sum. If they fail to comply:

Motion for Execution: The prevailing party can file a motion for execution.
Court-Ordered Seizure of Assets: The court may enforce the judgment by attaching or garnishing the debtor’s assets or funds in bank accounts.

It is crucial to note that while small claims judgments are final and executory, parties still must follow lawful processes to collect. Creditors cannot take the law into their own hands—any extrajudicial collection efforts must be in line with legal standards.

8. Conclusion

Small claims litigation in the Philippines provides a streamlined avenue for resolving debt-related disputes, making it easier for both creditors and debtors to obtain swift justice. However, as with any debt collection process, concerns about excessive fees, interest rates, and harassment often arise. Courts generally disfavor unconscionable or usurious charges, and various laws and regulations protect debtors from unfair collection practices.

To safeguard one’s rights:

Debtors should closely examine claims, gather documentation, and assert defenses against unreasonable charges or abuses.
Creditors must ensure their practices comply with legal and regulatory standards, avoiding any form of intimidation or harassment.

Ultimately, the small claims process is intended to be fair, speedy, and affordable. By understanding the scope of the law, parties can better navigate the system and achieve a resolution that is both lawful and equitable.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. For specific concerns or questions regarding small claims, excessive fees, or harassment, it is best to consult a qualified lawyer or seek guidance from the relevant government agencies.