Letter to Attorney:

Dear Attorney,

I hope this message finds you well. I am writing to seek legal advice regarding an issue I am facing with an online lending app. I applied for a loan, and while I was approved, I only received half of the amount I was supposed to get. The app has not provided clear communication about why this occurred, and they have continued to demand full repayment for the entire approved loan amount, which was never fully disbursed to me.

I would like to understand what legal options are available to me to resolve this situation. Specifically, I need to know the steps I should take to either recover the remaining loan amount or adjust my repayment obligation to reflect the amount I actually received. Could you provide guidance on the potential legal recourses under Philippine law for cases like this?

Thank you in advance for your assistance.

Best regards,
A Concerned Borrower

Legal Article: Addressing Partial Loan Disbursement from Online Lending Apps Under Philippine Law

In recent years, online lending platforms have gained considerable popularity in the Philippines due to the convenience they offer compared to traditional financial institutions. While these apps allow individuals to access funds quickly, they have also raised several legal concerns, particularly when lending practices deviate from contractual expectations. One such issue involves the disbursement of only a portion of the approved loan amount, while the borrower is still held liable for full repayment.

This article will examine the legal remedies available to borrowers in the Philippines when they find themselves in such situations, where the loan disbursement falls short of the agreed amount.

Legal Framework Governing Lending Transactions in the Philippines

1. Philippine Consumer Protection Act (Republic Act No. 7394)

The Philippine Consumer Protection Act is a foundational piece of legislation aimed at safeguarding the rights of consumers, including borrowers who enter into lending agreements with financial institutions or online platforms. The law enforces the principle of full disclosure, meaning that lenders are required to be transparent regarding the terms and conditions of loans. If an online lending app fails to disburse the full amount of a loan, this could be viewed as a violation of the borrower’s rights under the Consumer Protection Act.

Section 5 of the Act outlines the basic rights of consumers, including the right to information, choice, representation, redress, and safety. Specifically, a borrower who does not receive the agreed loan amount can invoke the right to redress, which refers to the consumer's right to seek legal or equitable remedies when their rights are violated.

2. Obligations and Contracts Law (Civil Code of the Philippines)

Under the Civil Code of the Philippines, the relationship between a lender and a borrower is considered a contract. Article 1159 states that contracts have the force of law between the parties and must be fulfilled in good faith. When a lending app agrees to lend a certain amount of money, that agreement creates an obligation to deliver the full loan. If the lender fails to comply, it can be considered a breach of contract.

In this case, the borrower may have the right to either demand specific performance (i.e., the full disbursement of the agreed loan amount) or seek a reduction in their payment obligation to match the amount they actually received. Failure to deliver the full amount constitutes a failure to meet the lender’s contractual obligations, allowing the borrower to claim remedies.

Recourse for Borrowers: Filing Complaints and Lawsuits

1. Filing a Complaint with the Securities and Exchange Commission (SEC)

Online lending companies in the Philippines are regulated by the Securities and Exchange Commission (SEC), which requires them to follow strict lending practices. Borrowers who experience issues with online lenders can file a formal complaint with the SEC, which has the authority to investigate and impose penalties on lenders who violate their obligations.

The SEC Memorandum Circular No. 18, Series of 2019, which regulates online lending, mandates that lending platforms comply with the terms of their agreements. If a borrower only receives half of the approved loan amount, they can file a complaint through the SEC’s Enforcement and Investor Protection Department (EIPD).

To file a complaint, the borrower must prepare the following:

A written statement of the complaint, including the details of the loan transaction;
Proof of the loan agreement, such as a screenshot or copy of the loan terms and conditions;
Any communication or evidence showing that the disbursed loan amount is less than the agreed amount.

The SEC will investigate the issue and, depending on its findings, may impose sanctions on the lending company. However, the SEC’s role is primarily regulatory, and it may not always result in the borrower being reimbursed immediately. This is why it’s essential for borrowers to consider other legal options as well.

2. Filing a Complaint with the Department of Trade and Industry (DTI)

Another recourse is to file a complaint with the DTI under the Consumer Protection Act. The DTI has jurisdiction over deceptive or unfair trade practices, which may include online lending apps that misrepresent the terms of their loans. The DTI will also conduct an investigation and, if warranted, impose administrative penalties or sanctions on the lender.

3. Small Claims Court (Metropolitan Trial Courts)

If the borrower cannot resolve the issue through regulatory bodies, they can file a lawsuit through the Small Claims Court system. The borrower may file for breach of contract or unjust enrichment, depending on the circumstances.

In cases of partial loan disbursement, the borrower may seek the following remedies:

Specific Performance: The court may order the lending company to disburse the remaining balance of the loan, as per the original agreement.
Recission: The borrower may ask the court to cancel the loan agreement entirely and be relieved from any obligation to repay the loan.
Reduction of Obligation: If the borrower wishes to retain the portion of the loan already received, they can seek to have their repayment obligation adjusted to reflect the actual amount received.

Filing a claim through the small claims process is generally more affordable and quicker than other types of court cases, as it does not require legal representation and follows a simplified procedural format.

4. Potential Liability of Lending Companies

Lending apps that fail to disburse the full loan amount yet demand repayment for the full loan could face legal liability under several laws. The following penalties may apply:

Breach of Contract: Under the Civil Code, if the lending company fails to meet its contractual obligation, the borrower can seek damages in addition to any other remedies they request.
Administrative Sanctions: The SEC and DTI have the authority to impose administrative sanctions, such as fines or suspension of licenses, on companies that engage in unfair practices.
Criminal Liability: In some cases, if the actions of the lending company involve fraudulent misrepresentation or other criminal acts, the responsible individuals within the company may face criminal charges. However, this would require a separate criminal complaint and a higher burden of proof.

Practical Considerations for Borrowers

1. Documenting Communication

It is crucial for borrowers to keep a thorough record of their communications with the lending app. This includes emails, text messages, or screenshots that show the amount of the loan approved, the amount disbursed, and any responses from the app’s customer service.

2. Negotiating with the Lending App

Before resorting to legal action, borrowers can try to negotiate directly with the lending company to rectify the issue. Many times, lending apps may resolve the matter through internal procedures. Borrowers should communicate their concerns clearly and in writing, demanding that the app either disburse the remaining loan amount or reduce the repayment terms accordingly.

3. Awareness of Terms and Conditions

Borrowers must be vigilant in understanding the terms and conditions of online loan agreements. Some lending apps include clauses that allow them to disburse the loan in installments or deduct fees upfront, which may explain why only a portion of the loan is received. However, if the app does not clearly explain such terms, it could be held liable for deceptive practices.

Conclusion

Borrowers who encounter partial disbursement of loans from online lending apps have several legal avenues to seek redress under Philippine law. These include filing complaints with the SEC and DTI, seeking remedies through the courts, and pursuing breach of contract claims. It is essential for borrowers to understand their rights and the legal remedies available to them, as well as to meticulously document their communications and the terms of their loan agreements. With proper action, borrowers can either recover the remaining loan amount or reduce their repayment obligations to reflect the amount actually disbursed.