The sinister schemes of online lenders


Angelo is a humble family man who represents everyday Filipinos. A loving husband and father of two, the Bulakeño native works as a family driver at a Pasig-based house. He earns a fair wage, at today’s family driver rates. Angelo’s salary is just enough for his family’s basic needs like rent, food and transportation. He has no savings. Extraordinary expenses like medical care, school fees, or emergencies are enough to send Angelo into a monetary meltdown.

Unfortunately, a family emergency occurred last November for which Angelo needed 68,000 pesos to save his family. Desperate, the man tried to borrow from friends and relatives, but to no avail. With the pandemic, everyone was struggling. At rock bottom, a friend advised him to explore online lenders that provide emergency loans within 24 hours. Angelo followed his friend’s advice. That’s when his nightmare began.

Working under the radar, many online lenders prey on desperate souls like Angelo. They lure innocent victims with text messages, social media advertisements and word of mouth, the care of loan brokers. They promise access to cash as quickly as a day.

Simply download the lender’s app and apply for a loan by agreeing to their terms and conditions. Approval is immediate and the loan proceeds are sent to the borrower by G-Cash, wire transfer or other electronic means.

Angelo borrowed a total of 68,000 pesos from 19 different online lenders in denominations of 1,000 pesos to 4,500 pesos each. This is what happened next….

He borrowed 3,000 pesos from a certain online moneylender on November 24. The loan had a term of 30 days and matured on December 24. It carried an exorbitant interest rate of 51.79% per month or 629.41% per year. The 3,000 P Angelo received became a liability of 4,553 P in just 30 days! Unfortunately, Angelo was unable to honor his payment on December 24. The online lender immediately imposed a penalty of 20% of the loan proceeds. In addition, interest accrued daily at a rate of approximately 2.6% per day.

Angel IfFinally, he paid his loan on December 31. He paid a total of P4,890 for a loan of P3,000. The online lender earned 63% interest in just 37 days thanks to poor Angelo.

His experience with another online lender was equally heartbreaking. Angelo borrowed 3,500 pesos from lender #2. The loan was approved, but the lender deducted 1,500 pesos or 43% of the loan proceeds for the supposed “account management fee”, “platform service fee “, “Risk Management Fee” and “Credit Report Fee.” Angelo received only 2,000 pesos but had to pay interest of almost 100% per month on a principal of 3,500 pesos.

The outrageous fees and interest rates aren’t even the worst part. The harassment one receives for late payment is the most vile part. If a borrower is late for even a day, an army of trolls sends text messages to berate, embarrass and threaten the borrower. Here is an example of such a message, received by Angelo:

Ano, Patigasan? Wala ka na bang kahihiyaan sa buhay? How can you tapos wala planong magbayad ng maaga….. pagkatpos si pautangin ng kumpanya naming and ipakain sa pamilya mo tapos hindi ka na magbabayad? Etong mga information month its selfies mo kasama ang identifier mo, asahan no na kakalat ito sa Credit Information Company to di ka na pamarisan!!!” (“What, you want to see who’s tougher? Aren’t you ashamed of life? You borrow and you have no intention of paying any sooner…after our society lent you and you fed your family, and then you don’t pay? Rest assured that your selfie information along with your ID will be shared with the Credit Information Corporation to prove a bad precedent!!!”)

The trolls would go further and call friends, relatives and the borrower’s employer to expose the loan and the late payment. Again, this is meant to shame the borrower into submission.

Obviously, when one accepts the terms of the loan, one gives permission to the online lending company to access all social media contacts. Poor Angelo – as an unsuspecting high school graduate, he had no idea he was giving up his personal information by agreeing to the lender’s terms.

Angelo was on the verge of a nervous breakdown in mid-December. Degraded and ashamed, he asked his employer for help. Luckily for him, his employer agreed to bail him out.

In total, Angelo borrowed 68,000 pesos from 19 lenders for which he only received 58,024 pesos due to excessive processing fees from some. His employer paid off all his debts on December 31. For loans with an average duration of about 15 days, the employer paid 32,667 pesos in interest. This represents an effective interest rate of 112% per month.

With the help of his employer, Angelo filed a complaint with the Bangko Sentral ng Pilipinas (BSP) and the Department of Trade and Industry (DTI), Consumer Protection ofIfce, and the Securities and Exchange Commission (SEC).

Angelo asks the BSP, the SEC and the DTI to investigate the sinister schemes of online lenders for their opportunistic practices and for their violations of the usury laws of the Philippines.

We count on the BSP, DTI and SEC for their immediate action on online lenders preying on our desperate compatriots.

Andrew J. Masigan is an economist

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Facebook@AndrewJ. Masigan

Twitter @aj_masigan

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