Dear Attorney,

I recently took out a loan from a lending company, but due to unforeseen circumstances, I was unable to make a payment on the due date. Although I was only a few days late, the company imposed a significant daily interest rate. Furthermore, they started sending threatening messages to me and, worse, began contacting people in my phone’s contact list who were not listed as references in my loan application. I feel harassed by this conduct and am unsure if it is legal. Can you advise me on my rights and what actions I can take against the lending company for these practices?

Sincerely,
A Borrower Concerned About Harassment

Insights

The practices described by the lending company—imposing excessive daily interest and harassing the borrower by contacting third parties—may violate several laws and regulations in the Philippines.

Interest Rates and Penalties
The imposition of steep daily interest rates may be subject to legal limitations under Philippine law. Lending companies are regulated by the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC). Under these regulations, lending institutions are required to disclose the full terms of the loan, including interest rates and any penalties for delayed payments. While there are no specific statutory limits for interest rates in commercial loans, any interest that is "unconscionable" may be subject to judicial scrutiny. Courts may strike down excessive interest rates that are considered oppressive under the Civil Code provisions on contracts, particularly Article 1229, which allows courts to reduce "equitable" interest if the agreed terms are deemed excessive.

If the interest rate you are being charged is disproportionate to what is normally imposed by other lending companies or far exceeds what was disclosed in your loan contract, you may have grounds to challenge it.
Harassment and Unfair Collection Practices
The collection methods being employed, such as threatening messages and contacting individuals who are not your guarantors or listed as references, may violate the provisions of the Lending Company Regulation Act of 2007 (Republic Act No. 9474), as well as the BSP’s rules on unfair debt collection practices. The BSP Circular No. 1048 lays out prohibited debt collection practices, which include using threats or violence, contacting unauthorized third parties, or engaging in unfair or abusive acts.

In particular, under Republic Act No. 10173 (Data Privacy Act of 2012), a lending company is not allowed to use or disclose personal information, including the contact details of individuals who were not provided as references. If the company has accessed and contacted your friends or relatives without permission, they may be held liable for violating data privacy laws. The National Privacy Commission (NPC) is the relevant body where you can file a complaint for such privacy violations.
Recourse and Legal Actions
You have several options for addressing these issues:
- File a Complaint with the SEC: The SEC regulates lending companies and can investigate unfair lending practices. You may file a formal complaint against the lending company for charging excessive interest or engaging in unethical collection methods.
- File a Complaint with the NPC: If the company has shared your personal data with unauthorized contacts, this may constitute a breach of the Data Privacy Act, and the NPC can take action against the offending party.
- Legal Action for Damages: You may also seek legal redress in court for moral damages or actual damages if you can prove that the company’s actions have caused you distress or harm. Harassment, particularly threats, could also give rise to criminal charges under laws penalizing unjust vexation.
Demand a Cease and Desist: Before pursuing legal action, you may first consider sending a formal demand letter to the lending company, requesting that they cease their harassing practices and correct their collection methods. This letter can serve as a record that you tried to resolve the matter amicably.

In summary, the lending company's actions may be in violation of Philippine laws regulating lending practices and debt collection. You may have grounds to file complaints with regulatory bodies and, if necessary, pursue legal action to protect your rights. It would be beneficial to consult with a lawyer to explore these options further and prepare any necessary legal documents.