Dear Attorney,

I hope this letter finds you well. I am writing to seek your legal advice and assistance regarding a situation I recently encountered with a lending application. Without my explicit consent, the lending app automatically disbursed an amount of PHP 2,900 into my account. Furthermore, the transaction record misleadingly states that I borrowed PHP 5,000.

Adding to my concern, the lending company has stipulated that I must repay the full amount of PHP 5,175 within just five days of the disbursement. This amount includes an interest charge, which seems unreasonable given the circumstances.

At no point was I informed of the terms and conditions of the loan, including the interest rates, repayment schedule, or any other pertinent details. This lack of transparency and the subsequent demand for repayment raise serious concerns about the legality and ethics of the company’s practices.

I would greatly appreciate your guidance on this matter, including the steps I can take to protect my rights as a consumer and resolve this issue fairly.

Sincerely,
A Concerned Consumer

Legal Article: Understanding Consumer Rights and Loan Practices in the Philippines

Unauthorized loan disbursements and unjust collection practices are increasingly prevalent in the digital age, especially with the rise of mobile lending applications. Consumers who find themselves in such situations must understand their rights under Philippine law and the legal remedies available to address these grievances. This article will provide a detailed overview of the applicable laws, relevant regulations, and practical steps to resolve such disputes.

1. Overview of Consumer Rights in Lending Practices

The rights of borrowers in the Philippines are protected under several laws, including the Consumer Act of the Philippines (Republic Act No. 7394) and the Lending Company Regulation Act of 2007 (Republic Act No. 9474). These laws aim to safeguard consumers against unfair, deceptive, and abusive practices by financial institutions, including lending companies.

1.1. Right to Full Disclosure

Under the Truth in Lending Act (Republic Act No. 3765), lenders are required to fully disclose the following before entering into a loan agreement:

The total amount of the loan.
The annual percentage rate (APR) or effective interest rate.
The terms and conditions of the loan.
Any additional fees or charges.

Failure to disclose these details constitutes a violation of the borrower’s rights. In your case, the lack of transparency surrounding the loan terms is a clear breach of this law.

1.2. Right to Informed Consent

The Data Privacy Act of 2012 (Republic Act No. 10173) mandates that personal data, including financial information, cannot be processed without the consent of the individual. Automatically disbursing a loan without your explicit consent or knowledge violates your right to informed consent.

1.3. Prohibition of Unfair Debt Collection Practices

The Financial Consumer Protection Act (Republic Act No. 11765) prohibits lenders from employing abusive, deceptive, or coercive practices to collect debts. Requiring repayment within an unreasonably short period, such as five days, and imposing excessive interest rates may fall under these prohibited practices.

2. Legal Violations in the Current Scenario

Based on your account, the lending company may have committed the following legal infractions:

2.1. Unauthorized Loan Disbursement

Automatically disbursing PHP 2,900 into your account without prior consent violates basic contract law principles. A valid contract requires mutual consent between the lender and borrower.

2.2. Misrepresentation of Loan Amount

Recording a loan of PHP 5,000 while disbursing only PHP 2,900 constitutes fraud and misrepresentation under the Revised Penal Code (RPC), specifically Article 315, which penalizes deceitful acts that cause damage to another party.

2.3. Excessive and Unreasonable Interest Rates

The imposition of high interest rates within a short repayment period could be deemed unconscionable under Article 1306 of the Civil Code, which prohibits contracts contrary to law, morals, good customs, public order, or public policy.

3. Remedies Available to the Consumer

3.1. Filing a Complaint with the Bangko Sentral ng Pilipinas (BSP)

As the primary regulator of financial institutions, the BSP oversees lending practices. Consumers can file complaints with the BSP’s Financial Consumer Protection Department for unfair practices by lending companies.

3.2. Reporting to the Securities and Exchange Commission (SEC)

Under the Lending Company Regulation Act, the SEC regulates lending companies. If the lender is not registered or violates the law, the SEC can investigate and impose penalties, including revocation of the company’s license.

3.3. Lodging a Complaint with the National Privacy Commission (NPC)

If the lending app violated the Data Privacy Act by processing your data without consent, you may file a complaint with the NPC for redress.

3.4. Initiating a Legal Action

Consumers may file a civil case for damages against the lending company for fraud or misrepresentation under the Civil Code and Revised Penal Code.

4. Steps to Protect Yourself

Document the Incident: Save all communications, screenshots, and transaction records. These will serve as evidence should you decide to file a complaint.
Contact the Lending Company: Send a written request to the company demanding an explanation of the disbursement and repayment terms. Clearly state that you did not consent to the loan.
File a Complaint: Depending on the nature of the violations, you may file complaints with the BSP, SEC, or NPC as outlined above.
Seek Legal Representation: Consult an attorney to explore the possibility of filing a case for damages or an injunction to prevent further harassment.

5. Penalties for Violations

Violations of the Truth in Lending Act, Data Privacy Act, or Lending Company Regulation Act can result in administrative fines, license revocation, or criminal liability. Additionally, companies engaging in fraudulent practices may face penalties under the Revised Penal Code, including imprisonment and fines.

Conclusion

The unauthorized disbursement of loans and subsequent demand for repayment on onerous terms is not only unethical but also illegal under Philippine law. Borrowers must remain vigilant, document irregularities, and pursue appropriate legal remedies to hold unscrupulous lenders accountable.

In your case, the lending company’s practices appear to violate multiple laws. By seeking legal counsel and filing complaints with the relevant regulatory bodies, you can assert your rights and prevent further abuses.