Can a Lending Company Harass You? Know Your Rights as a Borrower in the Philippines.

Lending companies have the right to collect debts, but this right is not without limits.

They cannot abuse, harass, oppress, threaten, or employ unscrupulous collection practices

against borrowers. Philippine law provides borrowers with protection including the right to full disclosure, fair treatment, protection of personal data, and effective remedies against abusive, inaccurate, or unlawful collection practices.

What are the rights of a borrower in the Philippines?

1. Right to clear and complete disclosure

Firstly, a borrower has the right to clear and complete information before entering into a loan. Financial service providers such as lending companies and banks must disclose the terms of a loan or credit transaction in clear and concise language. Aside from the principal amount, the interest rate, fees, charges, prepayment costs, penalties, method of determining the amount of interest and/or delinquency charges, and other terms must be disclosed to the borrower before a contract is signed. Disclosures must also be made to the borrower whenever the terms and conditions of the loan or credit transaction are changed.

2. Right to fair treatment and protection from unfair collection practices

Financial service providers may select their clients, but they may not discriminate on grounds such as race, age, gender, disability, health conditions, religion, or political affiliation, subject to legitimate risk assessment. They are also prohibited from using abusive and unfair collection or debt-recovery practices.

For financial service providers generally, Section 8(d) of the Financial Products and

Services Consumer Protection Act (2022) expressly prohibits abusive collection or debt-recovery practices. Its Implementing Rules and Regulations 3 also authorize regulatory sanctions such as restricting excessive or unreasonable charges and imposing fines, among others.

For credit card subscribers, Section 19 of the Philippine Credit Card Industry Regulation

Law (2016) provides that a credit-card issuer or collection agent may use reasonable and legally permissible means to collect. However, they must act in good faith, with reasonable conduct, and proper decorum. It may not harass, abuse, or oppress any person in connection with collecting credit-card debt.

Examples of potentially unlawful conduct include:

• repeated calls or messages which intimidate, humiliate, or pressure the borrower;

• contacting the borrower’s coworkers, friends, and/or relatives to intimidate, humiliate, or

pressure the borrower;

• threats of violence, public shame, arrest, or property seizure without lawful basis;

• the use of abusive or insulting language;

• a debt collector falsely representing himself as a government officer, lawyer, or court

representative; and

• unlawfully taking or seizing the borrower’s property.

  
  

3. Right to privacy and protection

Borrowers have the right to privacy and protection of their personal and financial

information. Borrowers may review their data, request correction of inaccurate or deficient

information, refuse certain disclosures to third parties, and request the removal of their data from a provider’s system when they no longer wish to use its services, subject to applicable law and regulation.

4. Right to protection against unconscionable charges

Borrowers and lenders are generally free to agree on interest rates and other charges.

However, this freedom assumes that the parties negotiated on relatively equal terms and that the borrower was not compelled by circumstances or subjected to unfair bargaining power. Courts may reduce or invalidate interest and related charges that are excessive, unconscionable, or imposed through unilateral criteria that violate the principle of mutuality of contracts under Article 1308 of the Civil Code. It must be noted that this is a case-to-case basis. A demand for payment, by itself, is not necessarily harassment. The Supreme Court ruled that ordinary enforcement of a creditor’s claim does not create liability absent bad faith, malice, or abuse of rights.

5. Right to efficient and effective complaint mechanisms

Financial service providers must maintain a free consumer-assistance mechanism for

complaints, inquiries, and requests. If a borrower disputes an amount or alleges an unauthorized transaction, the lender or provider’s consumer-assistance mechanism must provide a clear and timely response and inform the borrower of the action to be taken or that has been taken.

An unsatisfied borrower may elevate the matter to the financial regulator with jurisdiction over the provider. The proper complaint venue depends on the lender: generally the BSP for BSP-supervised entities, the SEC for certain lending or financing companies, or the National Privacy Commission if one’s personal data or contact list was misused. The exact venue should be verified against the lender’s license and the nature of the conduct.

Practical Steps for Borrowers

These rights do not automatically extinguish a valid loan obligation. Borrowers remain

generally required to pay the principal and lawful charges, but may challenge inaccurate

information, undisclosed fees, abusive collection practices, privacy violations, or unconscionable interest or penalties through the appropriate process.

Borrowers should keep the loan agreement, disclosure statement, payment records,

billing records, and all relevant communications with the lender. For disputed charges or

collection practices, request a written explanation and first raise the complaint with the lender’s consumer-assistance mechanism. If unresolved, the borrower may elevate the matter to the appropriate regulator.

Ultimately, borrowers must honor valid debts, while lenders must exercise their collection rights fairly, lawfully, and without abuse.

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The information provided herein should not be relied upon as a substitute for competent legal advice tailored to specific circumstances. Visitors are strongly encouraged to seek professional legal counsel before making any legal decisions or taking any action based on the content of this website.