Letter to a Lawyer

Dear Attorney,

I hope this letter finds you well. I am writing to seek your legal advice regarding a pressing matter involving an Online Lending App (OLA). I initially borrowed an amount of PHP 3,500. However, I only received PHP 2,100 after deductions. Due to financial constraints, I was unable to repay on time and opted for a 7-day payment extension amounting to PHP 1,400. I repeated this extension three times, paying more in extension fees than the actual amount I received.

Now, the OLA has started harassing me and my listed references through phone calls and messages. I am deeply concerned about these actions, as they are causing distress and embarrassment. I would like to know my legal options regarding these unfair practices and harassment.

Thank you for your time and assistance.

Sincerely,
A Concerned Borrower

Understanding Legal Protections for Borrowers Under Philippine Law

Online lending applications (OLAs) have become popular in the Philippines due to their convenience. However, numerous borrowers face issues such as excessive fees, exorbitant interest rates, and harassment from these entities. Below is an in-depth discussion of the laws and remedies available to borrowers who find themselves in similar situations.

1. Legal Framework Governing OLAs

a. Truth in Lending Act (Republic Act No. 3765)

The Truth in Lending Act ensures transparency in credit transactions. Under this law, lenders are required to disclose the following to borrowers:

The total amount to be financed;
The finance charges, including interest rates and other fees;
The net proceeds of the loan.

If the OLA failed to provide these disclosures or charged unreasonable fees without prior notice, they may be in violation of the Truth in Lending Act.

b. The Consumer Act of the Philippines (Republic Act No. 7394)

This law protects consumers from abusive, deceptive, and unfair practices. Borrowers have the right to be informed of the full terms and conditions of their loan and to be free from harassment or intimidation.

c. Data Privacy Act of 2012 (Republic Act No. 10173)

Many OLAs resort to harassing borrowers by contacting their references. This often involves the unlawful processing and sharing of borrowers' personal data. The Data Privacy Act prohibits these practices and provides remedies for affected individuals.

d. Anti-Usury Law

Although the Anti-Usury Law has been effectively repealed in terms of imposing strict caps on interest rates, the Bangko Sentral ng Pilipinas (BSP) may still regulate loan interest rates. Exorbitant interest and extension fees could be considered unconscionable under general principles of law.

e. Revised Penal Code

Harassment and public shaming by OLAs may fall under provisions of the Revised Penal Code, particularly Article 287 on unjust vexation, and Article 358 on libel if the actions damage a borrower’s reputation.

2. Analysis of Your Case

Based on the details provided, the following issues arise:

Exorbitant Fees and Deductions
Receiving only PHP 2,100 out of the PHP 3,500 loaned raises concerns about excessive hidden charges. Additionally, extension fees of PHP 1,400 for seven days appear unjustifiable and disproportionate.
Harassment and Data Privacy Violations
Contacting your references and harassing you through messages and calls constitutes a violation of the Data Privacy Act and may amount to unjust vexation under the Revised Penal Code.
Unfair Collection Practices
Harassment, intimidation, and public shaming are prohibited under applicable consumer protection laws and guidelines issued by the Securities and Exchange Commission (SEC).

3. Borrower Protections Under SEC Rules

The SEC oversees lending companies in the Philippines. It issued Memorandum Circular No. 18, Series of 2019, which outlines prohibited debt collection practices:

Use of threats, harassment, or abusive language;
Public shaming of borrowers through social media or other means;
Unauthorized use of personal data, including contacting individuals not liable for the loan.

If the OLA is registered with the SEC and engages in these practices, they may face penalties, suspension, or revocation of their license.

4. Remedies Available to Borrowers

a. Filing a Complaint with the SEC

The SEC enforces rules on lending companies. Borrowers can file a complaint by submitting:

A written account of the incident;
Supporting evidence, such as screenshots of harassing messages or call logs.

b. Reporting to the National Privacy Commission (NPC)

For violations of the Data Privacy Act, borrowers can file complaints with the NPC. Required steps include:

Submitting a formal complaint detailing the violation.
Providing evidence, such as proof of unauthorized contact with references.

c. Civil Action

Borrowers may file a civil case for damages if they suffer emotional distress or reputational harm due to the OLA’s actions. Claims for moral and exemplary damages may be pursued under Article 2219 of the Civil Code.

d. Criminal Action

Filing a criminal complaint for unjust vexation or libel may deter further harassment. Evidence of threats, defamatory statements, or public shaming must be presented.

5. Practical Steps You Can Take

Document All Interactions
- Save copies of all messages, screenshots, and call logs.
- Note dates and times of harassment incidents.
Verify the Legitimacy of the Lender
- Check if the OLA is registered with the SEC via their official website.
Cease Communication with the OLA
- Avoid direct communication and inform them that further harassment will be reported to authorities.
Inform Your References
- Notify your references about the situation and assure them that their inclusion is unauthorized.
Seek Legal Assistance
- Consult with a lawyer to explore filing complaints and taking legal action.

6. Conclusion

Your situation underscores the challenges faced by borrowers dealing with unregulated or abusive OLAs. Philippine law provides multiple avenues for redress, ranging from administrative remedies with the SEC and NPC to civil and criminal actions in court. By understanding your rights and gathering the necessary evidence, you can protect yourself from further harm and hold the OLA accountable for its actions.