Dear Attorney,

I recently received an offer from an online loan app. The interest rate was advertised as PHP 500. However, when my loan was approved, only PHP 2,020 was transferred to my account, and I was required to repay PHP 3,210 within seven days. I immediately requested a return of funds or an adjustment to the loan terms, but the lender refused. I am concerned about the fairness of these terms and would like advice on what legal steps I can take to address this issue.

Sincerely,
A Concerned Borrower

Insights:

Your concern about the online loan arrangement raises several legal issues that need to be carefully addressed, particularly regarding loan terms, interest rates, and deceptive lending practices.

Excessive Interest Rates and Unjust Terms
The terms you described could potentially violate the Philippine Lending Company Regulation Act (Republic Act No. 9474). Under this law, lending companies must fully disclose all loan terms, including the total amount to be paid and the interest rates involved. Lenders must also comply with regulations set by the Bangko Sentral ng Pilipinas (BSP) regarding interest rate limits, specifically for small loans. Although there are no fixed caps on interest rates in all cases, an excessively high interest rate can be challenged as unconscionable and thus legally questionable.
Deceptive Loan Practices
If the lender initially indicated that the interest rate would be PHP 500, but the repayment terms significantly deviate from what was promised (i.e., a much higher amount due within an unusually short period), this may be considered deceptive or unfair lending practices. The Truth in Lending Act (Republic Act No. 3765) also mandates lenders to provide clear and accurate information about loan terms. If the lending app provided misleading information or failed to disclose critical details, they may have violated this law.
Short Loan Terms and Possible Predatory Lending
Requiring you to repay the full loan amount within seven days is problematic. This practice may suggest predatory lending, where the terms are designed to trap borrowers in a cycle of debt. Predatory lending is highly discouraged and could be challenged legally. While short-term loans are common in online platforms, the repayment timeframe and the high difference between the loaned and payable amounts may make the terms abusive.
Refusal to Return Funds or Adjust Terms
The refusal of the lender to address your request for a refund or adjustment to the loan terms can be another violation of your rights as a consumer. The Consumer Act of the Philippines (Republic Act No. 7394) protects borrowers from abusive practices by lending institutions. It mandates that lenders must act fairly and reasonably in dealing with consumers, and refusal to correct a clear error or deception could be actionable.
Possible Remedies
- File a complaint with the Securities and Exchange Commission (SEC): If the online lender is registered with the SEC, you can file a formal complaint about their practices. The SEC has the authority to investigate lending companies that engage in deceptive or abusive behavior.
- Seek assistance from the Department of Trade and Industry (DTI): You can also report the lender to the DTI if you believe their practices are unfair. The DTI can mediate between you and the lending company.
- Consider small claims action: If the loan amount is small, you may file a small claims case in court. This can be done without the need for a lawyer, and the court will decide whether the loan terms are enforceable or if they should be nullified due to their unfairness.

In conclusion, based on the facts you provided, it appears that the online lender may have engaged in unfair lending practices by failing to clearly disclose the true loan terms and possibly imposing exorbitant fees. You have legal remedies available, and it would be prudent to gather all documentation related to the loan (including any communications with the lender) and seek further legal counsel to take the appropriate steps.