Find and Deal with Loan Sharks: How to Fight Loan Shark Harassment in the Philippines
Loans have always been a part of our lives and loan providers exist to help with this need. But not all loan providers have your best interest in mind. Some of the most dangerous and downright stressful loan providers are called loan sharks.
Loan sharks in the Philippines are actually quite more common than you know and you should be more careful and vigilant to ensure that your hard earned money is safe and sound.
Just like their underwater counterparts, they wait for the perfect opportunity to take advantage of you and bleed you dry. But how do you find loan sharks? Or if you have already fallen victim to them, how do you fight loan shark harassment?
What is a Loan Shark?
A loan shark is a person or company that offers loans at very high interest rates and uses blackmail and threats to collect debts. The most common examples of a loan shark in the Philippines are 5-6 lenders, sangla ATM lenders and other informal lenders.
They sneak in hidden charges and have short repayment periods, making it hard for a borrower to come up with enough funds to repay their loan.
These lenders usually prey on borrowers who are desperate, have low or no financial literacy, or have been rejected by formal lenders.
Loan sharks are everywhere, lurking within neighborhoods and online spaces. So how do you spot a loan shark?
1. Loan sharks have very high interest rates
Loan sharks have ridiculously high interest rates, sometimes even higher than what banks and other private lenders offer.
As a result, borrowers would have to pay large fees on top of the principal amount every repayment period.
According to the Bangko Sentral ng Pilipinas Circular No. 1133 of 2021, an effective interest rate ceiling equivalent to 15% per month for loans amounting to ₱1,000 to ₱15,000 and 16% for loans higher than ₱15,000. This cap applies to unsecured loans obtained through online or offline distribution channels.
2. Loan sharks don’t need background checks
Loan sharks do not need to conduct a background check on you because they already rely on predatory practices in order to get the money back (Debt 101 by Michele Cagan, CPA).
There’s no need for them to check your credit standing or income anymore when their astronomically high rates and fees are already set in stone.
3. Loan sharks have hidden and excessive charges
Loan sharks may impose hidden fees on borrowers. They may also include excessive charges like document prep fees into the loan (Debt 101 by Michele Cagan, CPA).
Loan sharks take advantage of having no contracts to sneak in these fees, often without the prior knowledge of borrowers. Note that loan documents are binding contracts that should protect both the lender and the loan borrower from any unexpected events within the period of your loan.
And speaking of contracts…
4. Loan sharks don’t offer formal contracts
Loan sharks provide no written contract or document that formally specifies the terms and conditions of a loan. This makes it possible for them to charge borrowers high interest rates and other fees.
Without a formal or legally-binding contract, it is difficult for borrowers to go after loan sharks or file a complaint against them.
And if you are provided with a contract, it is important to always read and study the terms and conditions before proceeding with any type of loan. If you are not presented with loan documents or contracts, you may want to think twice about proceeding with that transaction.
Don’t just sign your name without fully understanding the actual terms of the contract. Ask and clarify all the questions and all conditions before signing your name on any piece of paper.
5. Loan sharks usually requires personal collaterals like ATMs and bank accounts
Not all loan sharks do this, but lenders who offer sangla ATM loans require their borrowers to hand over their ATM card/s as collateral for a loan. This kind of scheme may seem good at first but this is a really risky arrangement on the end of the borrower.
They would also require the borrower to share their ATM card PIN and other bank information.
Using an ATM card as collateral is not illegal per se, but the Bangko Sentral ng Pilipinas has warned borrowers against sangla ATM lenders. According to the central bank, this scheme puts borrowers at risk of identity theft, scams, and unauthorized bank withdrawals.
6. Loan sharks have unethical debt collection practices
Perhaps the most dangerous aspect of a loan shark is their tendency to resort to unfair debt collection practices, sometimes bordering on abusive.
It is not uncommon for money lenders to go to a borrower’s home or workplace to collect unpaid debt. Loan sharks however, use threats, blackmail, or violence at the expense of a borrower’s privacy and peace of mind.
Nowadays, loan sharks turn to SMS and social media to “shame” defaulting borrowers, sending out messages that implore close contacts to pressure a borrower into repaying a debt.
Online Lending Harassment Philippines 2022
Since the beginning of the pandemic in early 2020, loan providers such as banks and other lending companies have shifted to online lending platforms to reach their customers better.
So did loan sharks.
This opened another opportunity for them to mask their sinister goals.
Though it’s normal to receive calls from lending companies following failure to pay on time, there is a limit to what they can do or say to their clients. Home visits are normal when it comes to collecting debt from clients with outstanding loan balances, but threats of physical harm and damage to personal property are definitely not part of a “peaceful” home visit.
Remember, the purpose of a home visit is to assess the borrower’s financial situation in order for lenders to 1) gain first-hand impression of the borrower’s financial situation 2) help the borrower restructure their loan that would be easier for them to repay what they borrowed; and 3) keep themselves updated with the condition of borrower and/or the loan collateral (if applicable). It also helps them verify that the information you provided is accurate such as your name, address, and business operations (if you declared yourself as a business owner).
Another modus operandi of online fraud and scammers is pretending to be a legitimate online bank or lending business to get your information, account details, or payments! You have experienced it once or twice in the past: receiving a text message from an unknown number claiming you have overdue payments from a bank or lending application; then the sender would ask you to pay your due amount through an unverified GCash or bank account.
There are so many examples of fraud and loan sharks in the Philippines since perpetrators are continually creating and making new ways to scam and trapping customers into questionable loans and payments.
Fight loan shark harassment with these easy steps!
1. Only take loans from banks, the government or licensed private lenders.
Check the legitimacy of the lending institution and their history with other borrowers. Do this by checking operating licenses, list of SEC registered online lending companies or applications, and other business permits.
2. Keep record of transactions.
Ilabas ang resibo! Receipts are a way to protect yourself from institutions claiming “you have not paid your loan”. This way, you have proof to show them when things don’t go well.
Receipts and transaction records are one of the best ways to protect yourself and your account from loan sharks or any form of loan. But do make sure that you are paying the correct amount and account (e.g. payments for UnaCash should always be through Dragon Loans and nowhere else).
3. NEVER EVER borrow money with your ATM card/s as collateral.
Aside from putting you at risk of identity theft, sangla ATM lenders can also make unauthorized bank transactions using your card and empty your bank account in a snap if you fail to make a repayment on time.
4. Always pay through official payment channels of banks or online lending apps.
Loan sharks are not the only ones you have to be wary of. You also have to be careful of the well thought out schemes of online frauds and scammers. In order to avoid falling victim to these creative schemes, always check the account number you’re paying your loans to, as well as the official repayment channels of the bank or company.
Dealing with a loan shark can definitely be a traumatic experience, but keep in mind that not all lenders are predatory. Some lenders still transact with borrowers’ needs as the main priority.
1. How to fight loan shark harassment in the Philippines?
If you fall victim to a loan shark, you may file a report and ask for assistance from SEC (Security and Exchange Commission).
2. Where do you report online lending harassment in the Philippines?
Prepare evidence of the harassment and send it to the proper agency. Check the types of violations such as Cybercrime (NBI), violations of the Online Lending Act (SEC), and Data Privacy violation (NPC).
These agencies have different processes when it comes to filing complaints, so you better check their websites and file your report accordingly.
3. What happens when you don’t pay a loan shark?
This is a case to case basis, but overall, borrowing money is a responsibility. Whether you borrow money from your friend, a bank, or a loan shark, you are still obligated to pay what you borrowed. However, it does not give lending companies to harass, physically or verbally abuse, or disregard your right as a person.
4. How to solve loan shark problems?
First of all, do not enter a sketchy transaction. Do not engage in any monetary transaction with lending businesses that do not have the correct and complete permits to operate.
Secondly, report any suspicious activity to the right agency (e.g. DTI, SEC, NBI, etc.) and always secure evidence and paperwork to prove your claims when you file for a report.
5. Can you take a loan shark to court?
Yes, you can. Loans and interest rates are strictly regulated in the Philippines. If any of these lenders violate these laws in any way, you may file a complaint and take them to court.
6. Is a loan shark illegal in the Philippines?
By definition, loan sharks are illegal and unregulated lenders. Keep yourself safe from loan sharks by only choosing registered, licensed, and legitimate lenders.
All in all, loans are big financial obligations that need to be repaid. Read more about the things you need to know before you apply for a loan in this article: Things to Consider When Applying for a Loan.
For safer loan transactions, choose legitimate lenders like banks and online lending apps like UnaCash. NO predatory interest rates, NO hidden charges, NO collaterals, and no need to worry about privacy intrusions!
Written by: Alyssa Divina | Edited by: Karla Maolen Visbal