Access to credit for banks before the rise of online lending platforms (OLP) was difficult. It required many paperwork and processes, with no assurance of approval. For several Filipinos, especially those with urgent financial needs, credit was unattainable back then.
This is why some Filipinos fall into the trap of informal money lenders. These loans have high-interest rates, around 20% or sometimes more, and without collateral or documentary requirements. The ease of access to credit draws Filipinos to informal loans despite the risks they entail.
Digitalization of Instant Credit: Online Lending Platforms
Now, here comes the online lending platforms. As technology advances, so does online commerce and banking. OLPs have minimal requirements and fast approval, just like the previous informal money lenders. However, OLPs have little to no human interaction during processing and it’s more accessible. This makes OLPs more appealing.
Filipino borrowers continue to cling to OLP instead of formal lenders like banks because they “feel in control and dignified knowing they can access credit even with limited documentation available.” Furthermore, the Philippines has a large unbanked population and increased smartphone usage. These factors contribute to the rising usage of OLPs, despite the high interest rates and risks.
Are OLPs Legal? Here’s What the Law Says
OLPs are not illegal, per se. However, there are requirements they must comply with in order to legally operate. Under the law, lending companies are required to obtain a Certificate of Authority from the Securities and Exchange Commission (SEC) along with other documents.
Furthermore, OLPs must comply with the guidelines outlined in the SEC Memorandum Circular on unfair debt collection practices. Under the memorandum, OLPs are prohibited from harassing borrowers and employing unfair means to collect debt, including:
- The use or threat of use of violence or any action that cannot legally be taken;
- The use of obscene, insulting, or profane language;
- Publication of the personal information of the borrower;
- Communicating or threatening to communicate false loan information;
- The use of false representation or deceptive means to collect or attempt to collect any debt or to obtain a borrower’s information; and
- Making contact at unreasonable times, unless expressly consented to by the borrower or the account is due for more than 15 days.
When Financial Help Becomes a Threat
Aside from high interest rates, Filipino borrowers from OLPs face threats and harassment. In some cases, borrowers face threats as soon as hours after missing a payment. In a subreddit called r/ola_harassment, borrowers express their grievances toward OLPs who allegedly harass them.
In response to the complaints, the National Privacy Commission (NPC) issued a Circular prohibiting OLPs from harvesting personal information, such as phone and social media contact lists, to harass delinquent borrowers. Since then, several OLPs were shut down due to violations of this Circular as well as the Data Privacy Act. One of those prosecuted was Fynamics Lending Inc., the operator of the PondoPeso online lending application. Fynamics was reported for allegedly harassing and public-shaming delinquent borrowers, which is prohibited under the Data Privacy Law.
Legal Recourse for Victims
Even if there is a law prohibiting such unfair lending practices, some OLPs continue to commit such acts. To help the victims and hold these erring OLPs accountable, it is best to report the incident to the governing agencies.
In case of unfair debt collection practices, including the use of threats or harassment, victims can report the OLP to the SEC. Meanwhile, if there is any violation of Data Privacy Rights, victims can contact the following agencies:
- National Privacy Commission (NPC) via complaints@privacy.gov.ph;
- Philippine National Police Anti-Cybercrime Group via acg@pnp.gov.ph and pnpacgcfcu@gmail.com;
- National Bureau of Investigation Cybercrime Division via their official Facebook page; and
- Department of Justice – Office of Cybercrime via cybercrime@doj.gov.ph.
However, not every case involving OLPs is simple. Sometimes, the threats could go beyond and cause damage to the reputation of the borrower. Other times, it can become a real safety concern. When this happens, it is best to consult a lawyer to determine the next step forward.
Disclaimer:
This article is intended for general informational purposes only and does not constitute legal advice. For specific concerns, it is best to consult a lawyer.