Dear Attorney,

I am seeking legal advice regarding a situation with a lending company. I initially borrowed ₱7,000, but within two weeks, my outstanding balance has ballooned to ₱14,000. They claim that the increase is due to an interest rate of 2% per day, coupled with an additional repayment fee of ₱2,000. Furthermore, I have been subjected to harassment by their representatives. I would like to understand whether this practice is legal under Philippine law and what remedies may be available to me. Your guidance on this matter would be greatly appreciated.

Sincerely,
A Concerned Borrower

Comprehensive Legal Analysis on Lending Practices, Interest Rates, and Harassment in the Philippines

1. Overview of Lending Practices in the Philippines
Lending companies in the Philippines are subject to specific laws and regulations that govern their operations. These laws aim to protect consumers from exploitative practices, including excessively high-interest rates and unethical collection methods. The primary legal frameworks that apply to lending practices include the following:

The Consumer Act of the Philippines (Republic Act No. 7394)
The Truth in Lending Act (Republic Act No. 3765)
The Revised Penal Code provisions on usury
The Lending Company Regulation Act of 2007 (Republic Act No. 9474)
Relevant circulars issued by the Bangko Sentral ng Pilipinas (BSP)

2. Legality of High-Interest Rates
Under the Philippines' legal framework, interest rates imposed by lending companies must adhere to reasonable standards. While the Usury Law (Act No. 2655) originally capped interest rates, Presidential Decree No. 1684 effectively lifted interest rate ceilings, allowing lenders to freely agree on rates. However, this deregulation does not permit unconscionable or excessively high rates. The Supreme Court has ruled that interest rates may be nullified if they are considered "excessive, iniquitous, unconscionable, or exorbitant," violating Article 1306 of the Civil Code, which allows courts to intervene in contracts contrary to public morals.

Analysis of Your Case:
A 2% daily interest rate is equivalent to an annualized rate of over 700%. Courts have consistently ruled that rates exceeding 60% per annum are presumptively unconscionable. Furthermore, the ₱2,000 "repayment fee" could be deemed a hidden charge that violates the Truth in Lending Act by obscuring the true cost of borrowing.

Relevant Case Law:

Medel v. Court of Appeals (1998): The Supreme Court invalidated a 66% annual interest rate, holding that it was excessive.
Spouses Solangon v. Salazar (2005): A 6% monthly interest (72% annually) was also declared iniquitous.

Given these precedents, the 2% daily rate, coupled with additional fees, may be declared void for being exorbitant.

3. Harassment by Lending Companies
The Fair Debt Collection Practices provision, under Republic Act No. 7394 (Consumer Act), prohibits abusive, unethical, and oppressive collection practices. Harassment, threats, and public shaming by debt collectors are illegal and actionable under Philippine law. The BSP has also issued guidelines for financial institutions to adopt ethical collection practices, emphasizing the following:

Debt collectors must respect the debtor's privacy and dignity.
Communication should not involve threats, intimidation, or false statements.
Public disclosure of a debtor's financial situation is prohibited.

Legal Remedies for Harassment:
Victims of harassment by lending companies may file a complaint with the following agencies:

National Privacy Commission (NPC): For violations of data privacy laws, such as exposing personal information to the public.
Department of Trade and Industry (DTI): For unethical business practices.
Bangko Sentral ng Pilipinas (BSP): For violations by BSP-regulated entities.
Barangay or Small Claims Court: For local dispute resolution or civil claims.

Additionally, harassment may constitute grave coercion or unjust vexation under the Revised Penal Code.

4. Applicability of the Lending Company Regulation Act of 2007
Republic Act No. 9474 mandates that all lending companies secure a license from the SEC and comply with fair lending standards. Violations of this Act include:

Charging exorbitant interest rates or hidden fees.
Failing to disclose the true cost of borrowing.
Engaging in unethical collection practices.

Borrowers may file a complaint with the Securities and Exchange Commission (SEC), which has the authority to investigate and penalize erring lending companies.

5. Remedies for the Borrower

Step 1: Document the Violation
Maintain a record of all communications and agreements with the lending company, including evidence of harassment.

Step 2: Negotiate or Mediate
You may approach the barangay or a mediator to negotiate a fair settlement with the lender.

Step 3: File a Complaint with the Appropriate Authorities

For Excessive Interest Rates: File a case in the regular courts to nullify the unconscionable interest and recover any excessive payments made.
For Harassment: File a complaint with the NPC, DTI, or local authorities.
For Unlicensed Operations: Report the lending company to the SEC for appropriate sanctions.

Step 4: Seek Legal Redress
Engage a lawyer to file a formal complaint in court, seeking to declare the loan agreement void and claim damages for harassment.

6. Small Claims Court Option
If the principal loan amount and damages fall within the jurisdiction of the Small Claims Court, you may file a case there for expedient resolution without the need for legal representation.

7. Practical Advice for Borrowers

Understand Your Rights: Be aware of the interest rates and fees before signing any loan agreement.
Read the Fine Print: Hidden fees and unfair terms often lurk in the details.
Seek Legal Help: If unsure about a loan's terms, consult with a lawyer or financial advisor.

Conclusion
The practices described—charging 2% daily interest and harassing borrowers—are likely illegal under Philippine law. Borrowers have robust legal protections and remedies, including challenging excessive interest rates, filing complaints for harassment, and seeking damages. You are encouraged to take proactive steps to document your case and seek assistance from regulatory bodies and legal counsel.

Should you require further clarification or assistance in pursuing your legal remedies, do not hesitate to reach out.

Sincerely,
[Your Legal Advocate]