Dear Attorney,

I have concerns about a financial transaction I entered into with an online lending platform. The amount I received was less than PHP 10,000, but they are requiring me to repay a much larger sum, between PHP 12,000 to PHP 14,000. Can this situation be considered estafa? Thank you for your guidance.

Sincerely,
Concerned Borrower

Insights

What is Estafa Under Philippine Law?

In the Philippines, estafa (also known as swindling) is a criminal offense penalized under the Revised Penal Code (RPC). It falls under crimes involving deceit and is covered by Article 315 of the RPC. Estafa involves fraudulent actions that cause damage to another party, often relating to the misappropriation of money, assets, or property.

Elements of Estafa

To establish estafa, the prosecution must prove the following elements:

Deceit or Fraud – There must be false pretenses, deceitful behavior, or fraudulent actions by the offender. These acts are intended to mislead the victim into believing something that is false.
Damage to the Victim – The fraudulent act results in damage or loss to the victim, typically in the form of monetary loss or property damage.
Reputation of Good Faith – The offender takes advantage of the victim’s trust or reliance on a false representation.

In practice, estafa can take many forms, such as bouncing checks, misrepresenting services or products, or failing to return borrowed funds or property under fraudulent circumstances. The key component in proving estafa is the intentional deceit used by the offender to trick the victim, leading to financial or material damage.

Common Types of Estafa

Estafa by Misappropriation – This occurs when someone receives money, goods, or other property under an obligation to deliver or return it but misappropriates it for personal gain.
Estafa by False Pretenses – This happens when someone makes a false claim or statement to obtain money, goods, or services from another.
Estafa through Fraudulent Contracts – This involves entering into a contract with fraudulent intent, such as when the terms are altered or false representations are made to deceive the other party.
Estafa by Means of Bouncing Checks (BP 22) – Issuing a check without sufficient funds is also a form of estafa.

Online Lending and Estafa in the Philippines

The rise of online lending apps has increased concerns about excessive interest rates, predatory lending practices, and violations of consumer protection laws. However, whether a loan agreement could be considered estafa depends on the facts of the case.

In loan contracts, estafa typically arises when there is deceit or false pretenses in the transaction, such as:

Misrepresenting the terms and conditions of the loan.
Falsifying the amount of money to be lent or collected.
Failing to disclose hidden fees, penalties, or interests that significantly inflate the repayment amount.

If the borrower voluntarily agreed to the loan's terms but later felt burdened by excessive interest or unfair conditions, it might not automatically be estafa. Still, it could potentially violate consumer protection laws or be deemed usurious if the interest rates are illegally high, surpassing the legal interest limits under Philippine laws.

Is it Estafa or Usury?

Sometimes, complaints about online loans may overlap with issues related to usury. Usury refers to charging interest rates higher than what is legally permitted. Under the Usury Law, as amended by Central Bank Circular No. 905, interest rates in the Philippines are deregulated, which means there is no longer a specific legal cap on loan interest rates. However, loans that involve unconscionable interest rates may still be challenged in court as being contrary to public morals or policy.

In cases where the interest rates charged by an online lending platform are excessively high or deemed unfair, this issue is often addressed under the Consumer Protection Act (Republic Act No. 7394) and other laws protecting borrowers against predatory lending. Usurious loans, if proven, may not be classified under estafa, but the loan contract could still be voided or reduced in court.

Potential Recourses for the Victim

If the situation involves misleading loan terms, hidden fees, or exorbitant interest rates, the victim has several options:

File a Complaint with the Securities and Exchange Commission (SEC) – The SEC has jurisdiction over lending companies in the Philippines, including online lenders. They can investigate fraudulent practices, hidden fees, or failure to disclose essential loan details.
Consumer Protection Complaint – The borrower can file a consumer protection complaint under the Consumer Act, especially if they believe they were misled or taken advantage of through unfair or fraudulent lending practices.
Civil Action – A borrower may also file a civil action for the annulment or modification of the loan contract if the terms are proven to be unconscionable or obtained through fraud.
Criminal Complaint for Estafa – If fraudulent misrepresentation or deceit is present, and the borrower suffered damage as a result, a criminal complaint for estafa may be filed under Article 315 of the Revised Penal Code.

Estafa vs. Civil Case for Breach of Contract

It is essential to distinguish between estafa and a civil case for breach of contract. Estafa involves criminal liability due to deceit, while a breach of contract typically involves civil liability for failing to comply with the terms of the agreement. In lending disputes, borrowers often mistakenly file for estafa when the proper recourse may lie in a civil action for rescission or modification of the contract, especially if the dispute centers on the terms of the agreement, interest rates, or payment terms.

Conclusion

Estafa is a serious criminal offense under Philippine law, requiring proof of deceit or fraudulent behavior leading to financial damage. In the context of online lending, borrowers should be aware of the terms and conditions of their loan agreements, as disputes over interest rates or hidden fees may not automatically constitute estafa but may instead fall under consumer protection or usury issues. If you believe you were defrauded in a loan transaction, it is crucial to consult with a legal expert to determine the best course of action, whether filing a criminal complaint, seeking annulment of the contract, or addressing the matter through consumer protection channels.