Dignity as collateral
It always starts with an offer that seems too good to pass up. An online lending app (OLA) promises easy cash, long repayment terms, and minimal requirements. For many struggling Filipinos who are living from paycheck to paycheck, these offers feel like the lifeline they need to stay financially afloat amid mounting expenses and obligations.
Pretty soon, however, this seemingly good decision begins to unravel. Stories shared on online message boards reveal just how easily an OLA can trap borrowers into a sinkhole of debt. First is through the classic bait-and-switch tactic. The apps initially advertise long repayment periods of 90 to 180 days to lure in customers with seemingly manageable terms. However, as soon as the loan is approved, the borrower is informed that they need to repay the amount, plus exorbitant interest in as short as seven days.
Worse, 30 percent to 40 percent of the loan are slashed from the disbursed amount under the guise of processing fees. A user shared how he immediately got approved for a P25,000 loan. After the deductions, he only received P19,500 and was asked to repay P35,000 after 30 days. While the Philippines no longer has a blanket usury law, the monthly interest rate of 80 percent is far beyond what is considered reasonable or ethical.
The nightmare doesn’t end there. Predatory lending apps weaponize shame and fear to compel repayment. To qualify for a loan, an individual is asked to download the lending app, which then gains access to their contacts and pictures. On the day of repayment, borrowers receive threatening messages warning them that their unpaid debt and incriminating photos will be broadcast to their family and friends unless they settle immediately.
When payments are missed, collection tactics become even more ruthless. Insults written in all caps are sent every day along with rape and death threats. Some have reported receiving graphic photos of allegedly dead or brutally beaten individuals. Everyone in the borrower’s contact list is bombarded with menacing messages to pressure the person to pay.
OLAs appeal to individuals who lack access to traditional banking or need emergency funds. Borrowers often overlook critical contract details because the terms are either purposely misleading or beyond the individual’s capacity to interpret without expert assistance. It is also alarmingly common for people to owe money to multiple lending platforms—some of them as many as 30 different applications. Unable to pay their first debt, they resort to a “tapal-tapal” system, where they use loans from one app to pay off loans from another.
The Lending Company Regulation Act mandates that all lending companies register with the Securities and Exchange Commission (SEC) and secure an authority to operate. It strictly prohibits harassment, threats, and public shaming in collection practices. Both the SEC and the National Privacy Commission have also issued advisories against unauthorized access to personal data and excessive interest charges. But in reality, a fragmented regulatory environment combined with a low level of financial literacy allows abusive OLAs to thrive. Government agencies often lack the capacity to monitor how platforms collect, store, and use personal data. Many Filipinos remain unaware of their rights, as well as of which agencies to turn to when those rights are violated.
Last month, the SEC issued a cease-and-desist order against Hupan Lending Technology Inc. (declared apps include Cashme, Sukiloan, Pesopoly, and Loan Tayo) for operating an unregistered platform (Magic Peso) along with fraudulent practices and abusive collection tactics. It also revoked the license of Hi-fin Lending Inc. (Peso Wallet and Credit Cash), which failed to disclose its partnership with a debt collection entity that was previously sanctioned for harassment. These steps mark progress. However, effectively addressing the problem of abusive OLAs requires more seamless engagement among concerned agencies to make sure regulations are properly enforced. Regulators should also have sufficient resources to investigate complaints, hold violators accountable, and pursue criminal charges when necessary.
Equally crucial is investing in financial education to enable citizens to discern legitimate lending services from exploitative schemes. Right now, many turn to online message boards for information, including on how to report abuse and seek help. While the crowdsourced advice could be helpful, some erroneously encourage ways to “game the system” by juggling multiple loans. We need widespread digital financial literacy programs, especially in vulnerable communities. The school curriculum should be updated with comprehensive information on e-money and e-finance. The government should actively partner with advocacy groups and grassroots organizations to provide targeted education and support for those most at risk.
Technology has made lending much easier, but the safeguards needed to protect consumers have not evolved at the same pace. We need more initiatives not just aimed at punishing violators but also aimed at preventing abuse before it begins.
