Bill seeks stronger safeguards vs. abusive online lenders

A bill has been filed in the House of Representatives seeking to strengthen consumer protection against abusive online lending practices by imposing stricter regulations on digital lenders and tougher penalties for violators.

House Bill 10366, authored by Akbayan Party-list Reps. Chel Diokno, Perci Cendaña and Dadah Ismula, together with Dinagat Islands Rep. Kaka Bag-ao, aims to curb widespread abuses by online lending platforms, including harassment, public shaming, unauthorized use of personal information, hidden charges, excessive interest rates and deceptive collection practices.

In a statement last week, Diokno said the proposal was prompted by the growing number of complaints from borrowers who have allegedly been victimized by abusive lending applications.

He said many online lenders exploit financially distressed borrowers through intimidation, humiliation and other unethical collection methods, stressing that no Filipino should suffer such treatment because of financial hardship.

The proposed measure guarantees borrowers the right to transparent loan terms, data privacy, fair debt collection practices and full disclosure of all loan costs. It also requires online lenders to assess a borrower’s ability to repay before approving a loan and secure informed consent for loan terms and the processing of personal information.

To prevent debt traps, the bill limits the total amount payable on an online loan—including principal, interest, penalties and other charges—to no more than 200 percent of the original loan amount. It likewise prohibits hidden charges, misleading loan terms and automatic loan rollovers without the borrower’s explicit consent.

The measure also bans abusive collection practices such as harassment, public shaming, contacting persons other than the borrower except under limited circumstances, and baseless threats of criminal prosecution.

Violators could face imprisonment of three to six years and fines ranging from ₱100,000 to ₱1 million, with heavier penalties for cases involving serious harm or illegal operations.

The bill also proposes the creation of the Victim Compensation Board for Online Lending Abuses under the Securities and Exchange Commission to hear complaints and award compensation through a dedicated victim compensation fund. It likewise authorizes the SEC to block or remove unlicensed online lending applications and strengthen inter-agency enforcement against illegal operators.