Loan sharks are unlicensed moneylenders who operate outside the law, offering quick cash but charging exorbitant interest rates and using aggressive or illegal collection tactics. In the Philippines, they prey on vulnerable individuals who lack access to formal credit, trapping them in cycles of debt and harassment.
Loan sharks are illegal money lenders who operate without authorization, offering quick loans at extremely high interest rates and often using threats or intimidation to collect debts. They typically target vulnerable individuals who cannot access formal credit, trapping them in cycles of debt.
Loan sharks often operate without paperwork or clear loan terms, demand cash payments, and may take personal items like bank cards or IDs as collateral. They can escalate from friendly lenders to aggressive enforcers, using harassment or violence to recover money. Many loan sharks also exploit online lending platforms, increasing their reach and impact.
Victims frequently feel trapped, borrowing more to stay afloat but falling deeper under the lender’s control. The emotional toll includes fear, isolation, and stress.
Traditional Loan Sharks ("5-6" Lenders)
These lenders usually operate in local communities, offering small cash loans with extremely high interest rates—often around 20% per month (e.g., lending ₱1,000 and demanding ₱1,200 repayment in about 40 days). They rely on verbal agreements, avoid paperwork, and often use intimidation or public shaming to enforce repayment.
According to the Securities and Exchange Commission (SEC), the Supreme Court has declared the "5-6" lending scheme illegal. The SEC enforces an interest rate cap on lending companies and their online lending platforms as mandated by the Bangko Sentral ng Pilipinas (BSP) Circular No. 1133.
This circular sets the maximum nominal interest rate at 6% per month (or 0.2% daily), while the effective interest rate is capped at 15% per month (or 0.5% daily) for unsecured loans up to ₱10,000 with a tenor of four months or less.
Sangla-ATM Lenders
This type requires borrowers to hand over their ATM cards as collateral. The lender then withdraws money directly from the borrower’s bank account, sometimes without authorization, violating legal protections on wage deductions.
However, despite these regulations, the BSP has noted that there is currently no law prohibiting the use of ATM cards as collateral for loans.
Online Loan Sharks
Emerging with the rise of digital lending, these lenders operate through mobile apps or online platforms. They offer quick loans but charge hidden, exorbitant interest rates (sometimes 40–70% annually or more). They often demand access to borrowers’ phone contacts and threaten to publicly shame late payers.
Employer-Internal Payday Lenders
These operate near workplaces, offering payday advances without proper licenses, often violating labor laws and exploiting employees’ immediate cash needs.
In all cases, loan sharks operate illegally, outside regulatory frameworks, and use aggressive or illegal methods to recover debts
Charge usurious interest rates and excessive fees, making repayment nearly impossible.
Loan sharks lure borrowers with promises of quick cash but impose extremely high interest rates, often exceeding legal limits by a wide margin. For example, some charge interest rates over 20% per month or even higher, with hidden fees that accumulate rapidly. These exorbitant costs trap borrowers in a cycle of debt, where the amount owed grows faster than they can repay, making it almost impossible to clear the loan.
Use intimidation, harassment, and threats—including public shaming and unauthorized sharing of personal information—to collect debts.
When borrowers fail to meet payments, loan sharks resort to aggressive and illegal collection tactics. This includes constant phone calls, text messages, and social media harassment aimed at shaming borrowers publicly by exposing their debts to friends and family. They may also threaten physical harm or damage to property, visit borrowers’ homes or workplaces uninvited, and use blackmail to pressure repayment. Such tactics cause severe emotional distress and violate privacy rights.
Require illegal collateral such as ATM cards, government IDs, or personal belongings.
Loan sharks often demand collateral that is illegal or risky to hand over, such as ATM cards, government-issued IDs, jewelry, or land titles. For example, in the “Sangla-ATM” scheme, borrowers surrender their ATM cards and PINs, giving lenders unauthorized access to their bank accounts, which can lead to unauthorized withdrawals or identity theft. These practices exploit borrowers’ desperation and lack of financial literacy.
Exploit borrowers’ lack of legal knowledge and financial desperation.
Loan sharks target vulnerable individuals who are unaware of their legal rights or lack access to formal credit. They use complex or no formal contracts, verbal agreements, and unclear loan terms to confuse borrowers. Because borrowers often urgently need money, they accept unfair conditions without fully understanding the consequences. Loan sharks also prey on low-income earners and those rejected by banks, deepening financial hardship through predatory lending.
Document All Transactions: Keep Records of Loans, Payments, and Communications.
Maintaining thorough documentation is crucial when dealing with loan sharks. This includes keeping copies or photos of any loan agreements, receipts of payments made (cash, bank transfers, or e-wallet transactions), and records of all communications such as text messages, phone calls, emails, or chat conversations. Written proof helps establish the terms you agreed to, the amounts you paid, and any harassment or threats you received. These records are essential if you decide to file complaints with authorities or seek legal recourse, as they provide evidence to support your claims and protect you from false accusations or inflated debts.
Seek Legal Assistance: Contact Accredited Lawyers or Consumer Protection Groups.
If you face harassment or unfair treatment from loan sharks, consulting a lawyer who specializes in consumer or criminal law can help you understand your rights and options. Accredited legal professionals can guide you through the complaint process, help draft legal documents, and represent you in court if necessary. Additionally, consumer protection organizations and NGOs offer free or low-cost advice, mediation, and support services for victims of predatory lending. They can also connect you with government agencies that enforce lending regulations and protect borrowers.
File Complaints: Use Administrative or Small Claims Courts to Challenge Unfair Interest Rates or Abusive Collection.
Borrowers can formally challenge illegal lending practices by filing complaints with regulatory bodies such as the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), or the Department of Trade and Industry (DTI). These agencies investigate unlicensed lenders, usurious interest rates, and abusive collection methods. For disputes involving smaller amounts, borrowers may also pursue cases in small claims courts, which provide a faster and more accessible venue for resolving financial conflicts. Filing complaints can lead to sanctions against illegal lenders, recovery of overpaid amounts, and cessation of harassment.
Avoid Physical Confrontation: Report Harassment Rather Than Retaliate.
Loan sharks often use intimidation and threats to pressure borrowers. Engaging in physical confrontation or retaliation can escalate the situation and put you at risk legally and physically. Instead, document all incidents of harassment and immediately report them to the police, the National Bureau of Investigation (NBI), or other law enforcement agencies. Authorities have the mandate to investigate and act against illegal lenders and their enforcers. Staying calm and relying on legal protections is the safest way to handle threats and ensure your safety.
National Privacy Commission (NPC)
If your data privacy rights under the Data Privacy Act of 2012 have been violated by a lender, you can file a complaint with the NPC.
NBI Cybercrime Division
For violations related to the Cybercrime Prevention Act of 2012, complaints may be filed with the National Bureau of Investigation – Cybercrime Division (NBI-CCD) or the Philippine National Police – Anti-Cybercrime Group (PNP-ACG).
PNP Anti-Cybercrime Group
Securities and Exchange Commission (SEC)
You can submit complaints against lending companies by downloading and completing the complaint form, attaching all supporting documents, and including a scanned valid government-issued ID.
Bangko Sentral ng Pilipinas (BSP)
For complaints against BSP-supervised financial institutions, download and fill out the BSP Complaints, Inquiries, and Requests (CIR) Form and provide relevant proof or documents.
To protect yourself, always check if a lender is authorized by the relevant financial authority (e.g., the FCA in the UK), avoid loans without formal agreements, and never hand over personal valuables as collateral. If you suspect you are dealing with a loan shark, you can report them confidentially to specialized teams such as the Illegal Money Lending Team (IMLT) or Stop Loan Sharks, which offer support and have powers to investigate and prosecute.
Loan sharks continue to pose a serious threat to many Filipinos’ financial well-being. Awareness, caution, and knowing where to report abuse are key to protecting yourself from illegal lending practices. Illegal lenders operate outside the law, often using deceptive contracts, exorbitant interest rates, and intimidation. Protect yourself by verifying lender legitimacy, carefully reviewing loan terms, safeguarding personal information, and reporting illegal activities to authorities. Vigilance is the best defense against loan sharks.
Date of publication: 20.06.2025
Interest |
Loan amount |
Term |
Borrower age |
SEC registered |
||
|---|---|---|---|---|---|---|
|
APR 143%
|
₱1,000 — ₱20,000
|
|
22 — 70 years
|
Registration № CS201804564, SEC Certificate of Authority No. 1165
|
|
|
|
APR from 0% to 427%
|
₱500 — ₱25,000
|
from 3 to 12 months
|
18+ years
|
Latvian business number 43603085405
|
|
|
|
from 0%
|
₱1,000 — ₱50,000
|
up to 12 months
|
20 — 70 years
|
SEC Registration No. CS201908275 SEC Certificate of Authority No. 2990
|
|
