Dear Attorney,

I would like to ask about my obligation to pay an online loan. I recently discovered that the company I borrowed from has a cease and desist order issued by the Securities and Exchange Commission (SEC). Am I still legally required to settle my debt under these circumstances? Thank you.

Concerned Borrower

Insights

In the Philippines, a cease and desist order (CDO) issued by the Securities and Exchange Commission (SEC) typically halts a company’s operations due to violations of laws or regulations. However, the issuance of a CDO does not automatically absolve borrowers of their obligations to repay debts.

The legal basis for this lies in the nature of contracts. When you enter into a loan agreement, whether with a financial institution or an online lender, you are bound by the terms of that agreement unless it is proven to be unlawful or void. A CDO generally addresses the lender’s operations, but it does not nullify existing, lawful contracts with borrowers. Therefore, as a borrower, you are still required to honor your debt unless there is a separate legal basis to invalidate your loan agreement, such as fraud, usury, or a violation of lending laws.

The CDO may lead to regulatory penalties or operational restrictions for the lender, but these are separate from your contractual obligations as a debtor. That said, you may wish to review the legitimacy of the loan terms, especially if they involve excessive interest rates or improper collection practices. In cases where a lending company has violated lending laws, borrowers may have grounds to dispute certain terms of the loan, but this typically requires proper legal evaluation and filing of complaints with authorities like the SEC or Department of Trade and Industry (DTI).

To fully understand your rights and obligations, it is advisable to consult with a lawyer who can assess the specifics of your loan contract and determine whether any illegal practices could affect the validity of the debt. In some cases, the borrower might be entitled to relief, but this requires an individual review of the facts.