Letter to the Lawyer

Dear Attorney,

I am writing to seek your legal advice regarding an urgent concern involving online lending applications (OLAs). Due to financial difficulties, I borrowed money from several OLAs. Unfortunately, I got caught in a "tapal system" where I was forced to take loans from one lender to pay another, leading to a significant increase in my debts due to high-interest rates.

Currently, these OLAs are engaging in harassment and threats to coerce payment from me. They have threatened to publicly post my photos and ID online as a form of public shaming. I fully intend to repay my obligations, but I believe their methods of collection are unjust and abusive.

This situation has caused me immense stress and anxiety. I would like to know the legal remedies available to me under Philippine law to address these abusive practices and protect my rights as a borrower.

Thank you very much for your guidance and assistance.

Sincerely,
Concerned Borrower

Legal Article: Handling Harassment and Unfair Collection Practices by Online Lending Apps in the Philippines

The proliferation of online lending applications (OLAs) has provided many Filipinos with quick access to financial assistance. However, the ease of obtaining loans often comes at a steep price, particularly when borrowers encounter unethical and abusive practices by certain lending platforms. This article comprehensively discusses the rights of borrowers under Philippine law, remedies available against harassment by OLAs, and legal avenues for addressing unfair collection practices.

1. Governing Laws and Borrower Protections in the Philippines

Several laws govern the relationship between creditors and borrowers in the Philippines, particularly in the context of harassment and debt collection. Key legal instruments include:

a. The Lending Company Regulation Act (R.A. 9474)

The Lending Company Regulation Act governs lending companies' operations and mandates compliance with fair lending practices. Under this law:

Lending companies must be registered with the Securities and Exchange Commission (SEC).
They are required to provide borrowers with full transparency on loan terms, including interest rates and penalties.
Unfair practices, such as harassment, misrepresentation, and abusive collection methods, are prohibited.

b. The Financial Consumer Protection Act (R.A. 11765)

Signed into law in 2022, the Financial Consumer Protection Act aims to safeguard consumers against unfair, abusive, or fraudulent financial practices. It grants regulatory agencies, such as the SEC, the authority to address abusive behaviors by financial service providers.

c. The Revised Penal Code and Civil Code Provisions

Harassment and public shaming of borrowers may constitute criminal offenses under the Revised Penal Code:

Grave Threats (Article 282): Threatening to cause harm, such as publicly sharing private information, can be criminally prosecuted.
Slander or Oral Defamation (Article 358): Publicly maligning an individual’s reputation may give rise to a civil or criminal defamation case.
Violation of Privacy Rights: Publicly posting a borrower's private details, such as photos and IDs, without consent may constitute a violation of privacy rights protected by the Civil Code.

2. Common Abusive Practices by OLAs and Their Legal Implications

a. Excessive Interest Rates

Under Bangko Sentral ng Pilipinas (BSP) Circular No. 1133 (2021), the maximum interest rate for short-term, unsecured loans offered by lending companies is capped at 15% per month (or about 0.5% per day). Lenders charging beyond this limit may be subject to sanctions.

b. Harassment and Threats

Section 2.3 of SEC Memorandum Circular No. 18 (2019) explicitly prohibits lending and financing companies from:

Using abusive or threatening language during debt collection.
Threatening to post borrowers’ personal details or use such details to shame them publicly.

Violators may face fines, revocation of their licenses, and potential criminal liability.

c. Unauthorized Access to Contacts

Many OLAs require borrowers to grant access to their phone contacts. They misuse this access to contact the borrower’s family, friends, and colleagues in an attempt to shame the borrower into paying. This is a clear violation of privacy rights under the Data Privacy Act (R.A. 10173) and SEC guidelines.

3. Steps Borrowers Can Take Against OLA Harassment

Step 1: Document Evidence of Harassment

Keep a detailed record of all abusive communications, including:

Screenshots of messages and emails.
Records of phone calls or voicemails.
Threats involving the public dissemination of private information.

Step 2: File a Complaint with the SEC

The SEC oversees lending companies and has mechanisms to handle complaints against abusive OLAs. To file a complaint:

Gather evidence of the harassment.
Submit a formal complaint to the SEC via their online portal or office.

Step 3: Report Privacy Violations to the National Privacy Commission (NPC)

For unauthorized sharing or threatened sharing of personal information, file a complaint with the NPC. Violations of the Data Privacy Act carry significant penalties, including imprisonment and fines.

Step 4: Seek Legal Remedies in Court

Borrowers can file civil and criminal cases against OLAs for:

Defamation: For damaging the borrower’s reputation through public shaming.
Injunctions: To stop the OLA from continuing abusive practices.
Damages: For emotional distress, reputational harm, and financial loss.

4. Borrower’s Rights During Debt Collection

a. Right to Dignity and Respect

Borrowers are entitled to respectful treatment, regardless of their financial situation. Collectors cannot:

Use threatening or obscene language.
Engage in harassment or intimidation.

b. Right to Accurate Information

Borrowers must receive accurate information regarding:

The total loan amount due.
Applicable interest rates and penalties.

c. Right to Privacy

OLAs are prohibited from accessing, using, or sharing borrowers’ private information without consent. Violations may lead to sanctions under the Data Privacy Act.

5. Key Legal Precedents and SEC Enforcement Actions

The SEC has acted against several OLAs for abusive practices. For example:

In 2021, the SEC shut down multiple OLAs for harassment and privacy violations.
Courts have also granted damages to borrowers in cases where OLAs engaged in public shaming or defamation.

6. Practical Tips for Borrowers Facing OLA Harassment

a. Communicate Only in Writing

Avoid verbal confrontations. Use written communication to document all interactions with the lender.

b. Request Payment Restructuring

Some OLAs offer loan restructuring options to help borrowers manage their debt more effectively.

c. Seek Assistance from Government Agencies

Approach the SEC, NPC, or the Department of Justice for help in addressing abusive practices.

Conclusion

Borrowers facing harassment and abusive practices by online lending applications in the Philippines are not powerless. Philippine laws provide robust protections to ensure borrowers are treated fairly and respectfully. If you are a victim of OLA harassment, remember to document evidence, file complaints with appropriate authorities, and seek legal remedies where necessary. Consulting with an attorney can also help ensure your rights are fully protected.