LHL ONLINE LENDING INC. doing business under the names and styles of PAUTANG ONLINE and PAUTANG PESO

Securities and Exchange Commission FINANCING AND LENDING COMPANIES DEPARTMENT BAGONG PILIPINAS FinLend Order No. 2025.3q IN THE MATTEROF FOR: VIOLATION OF R.A.3765 OR THE TRUTH IN LENDING ACT; AND SEC LHL ONLINE LENDING INC. DOING BUSINESS UNDER THE NAMES AND STYLES OF PAUTANG ONLINE,AND PAUTANG PESO SERIES OF 2019,ON THE PROHIBITION MEMORANDUM ON UNFAIR CIRCULARNO. DEBT COLLECTION 18 Certificate of Authority No.3119) (SEC Reg.No. CS201916699 and PRACTICES OF FINANCING COMPANIES AND LENDING COMPANIES Respondent ORDER 2100 A. Mabini St., Malate, Manila, with email addresses at aimee@fastlending.ph BUSINESS UNDER THE NAMES AND STYLES OF PAUTANG ONLINE,AND PAUTANG PESO (the Authority No.3119, and registered address at Unit D,Ground Floor,Echelon Tower Condominium Building roxas_vangie@yahoo.com. Respondent),a registered lending corporation with SEC Reg.No.CS201916699 and Certificate of This resolves the administrative proceedings against LHL ONLINE LENDING INC. DOING and STATEMENT OF FACTS "Commission"), for alleged violations of SEC Memorandum Circular No. 18, Series of 2019 ("SEC MC 18") Lending Companies and R.A.3765 or the Truth in Lending Act (TILA). Lending Platforms (OLPs") were filed before the Financing and Lending Companies Division (formerly "FLCDNow"Department" or "FinLenD" of the Securities and Exchange Commission ("SEC"or the otherwise known as the Prohibition on Unfair Debt Collection Practices of Financing Companies and From September 2022 to March 2023, multiple complaints against the Respondent and its Online Thereafter, Show Cause Letters ("SCL") and Comment Letters were sent to the Respondent. COMPLAINT OF MS. MARGIE BALDAD (against PAUTANG PESO) that on December 25, 2022, she applied for a loan amounting to Eight Thousand Pesos (PhP8,000.00) with a loan term of one hundred eighty (180) days. Ms. Baldad partially paid an amount of Three Thousand Pesos on January 8,2023;however, the Respondent was forcing her to pay the remaining balance despite the loan not being due yet. Moreover, she noticed that the loan contract agreement was changing whenever she opened it.Ms. Baldad attached a screenshot of the loan agreement and their conversation. On January 13,2023,Ms. Baldad filed a complaint against the Respondent,alleging, among others days to explain why it should not be held liable for the alleged charges. On 3 April 2023,FinLenD sent a Show Cause Letter to the Respondent,giving it a period of five 5 April 28, 2023, which was granted by the Hearing Officer. counsel, orally moved to file Comment/Answer to the instant Complaint within fifteen (15) days or until On 13 April 2023, FinLenD called for a conference with the Respondent. The latter,through its 0 Scan the QR to verify the document Page 2 of 8 In the Matter of. STYLES OF PAUTANG ONLINE, AND LHLX BUSINESS UNDER THE NAMES AND PAUTANG PESO ONLINE LENDING INC.DOING in good faith2. meeting of minds between two persons whereby one binds himself, with respect to the other, to give arising from contracts have the force of law between the contracting parties and should be complied with something or to render some servicel.Further, Article 1159 of the Civil Code provides that obligations A Comment/Answer was filed stating that under Article 1305 of the Civil Code, a contract is a amount4. Furthermore, the loan agreement was validly entered into by Ms. Baldad and the Respondent; hence, it shall have the force and effect of law and must be complied with in good faiths. default since the term of the loan is 180 days, and it had been less than 180 days when the Respondent demanded payment. The Company argues that while the term of the loan is 180 days, the loan is payable in installments3. When an installment becomes due or matures, the Respondent has the right to collect it While other installments that have not yet matured are not due and demandable, it is different when an installment has already become due. In such a case, the law gives the Respondent the right to collect that The Company also disagrees with Ms. Baldad's claims, stating that she could not have been in installment matured, Ms. Baldad had the obligation to pay it. Unfortunately, in this case, Ms. Baldad failed to do so, as she admitted in her complaint that she only paid Three Thousand Pesos (PhP3,000.00) out of the Eight Thousand Pesos (PhP8,000.00) loan. Hence, the Respondent cannot be faulted for collecting due payments from Ms. Baldad. Neither does the act of the former constitute an unfair collection practice In sum, Ms. Baldad entered into the contract and agreed to pay in installments. When each COMPLAINT OF MR. CHRISTIAN ALEJO (against PAUTANG PESO) payable for 150 days. It was also provided that the payment shall be made on the second due date.However, after submission and verification, the loan term was found to be only seven (7) days. Upon learning this,he requested loan cancellation, but an agent told him that it could not be cancelled. The amount was credited alleges that the Respondent is employing unfair debt collection practices. information. He narrated that he applied for a loan amounting to Three Thousand Pesos (PhP3,000.00) to his account;he tried to contact them to return the amount,but his calls went unattended.Mr.Alejo also Mr. Alejo alleged, among others, that the loan app of the Respondent contains misleading A Comment Letter was sent to the Company to answer for the alleged violation. is that there is a discrepancy between the statement made by the alleged agent of the Respondent and the Loan Agreement, Mr. Alejo could have verified the same with the Company before filing this instant as it is what was agreed upon by the parties. that it did not violate SEC MC 18, as the Respondent did not employ any of the unfair collection practices facts constituting a violation of SEC MC 187. The Respondent further asserts that it did not violate Republic pertinent documents related to his loan before he proceeded with completing his loan application. The Respondent disclosed to Mr. Alejo the fees and the payment schedule of his loan. If Mr. Alejo's contention Complaint to avoid any inconvenience to all parties. After all, the written contract is what should govern enumerated in the said Mc.Even a close scrutiny of Mr.Alejo's allegations would show that there are nd Act No.3765,or the Truth in Lending Act,as Mr.Alejo was provided with a copy of the contract and other In an Answer dated April 28, 2023, the Respondent denied the Complainant's allegations, stating COMPLAINT OF MR.BERNARD MARAY QUIZON JR.(against PAUTANG ONLINE) loan. However,due to the delay in disbursing the loan amount,he decided to cancel it. On May 22,2023,he Mr. Quizon filed a complaint against the Respondent, Pautang Online, alleging that he applied for a Paragraph 9 of the Answer dated April 2023-Alejo v.Ihl Paragraph 10 of the Answer dated April 2023-Alejo v.Ihl Paragraph 9 of the Answer dated April 2023 - Baldad vs lhl. 2 Paragraph 5 of the Answer dated April 2023 - Baldad vs lhl. 3 Paragraph 6 of the Answer dated April 2023 - Baldad vs Ihl. Paragraph 7 of the Answer dated April 2023 - Baldad vs lhl. 5 Paragraph 8 of the Answer dated April 2023 - Baldad vs lhl. 1 Paragraph 4 of the Answer dated April 2023-Baldad vs Ihl Or Scan the QR to verify the document Page 3 of 8 In the Matter of BUSINESS UNDER THE NAMES STYLES OF PAUTANG ONLINE, PAUTANG PESO LHL ONLINE LENDING INC.DOING AND AND received a call from an agent forcing him to avail a loan product. Despite Mr. Quizon's denial of availing himself of their loan products, a certain amount was still credited to his account, despite his prior cancellation. The Respondent even contacted his cousin to verify Mr. Quizon's account status, as the money had already been disbursed. Mr. Quizon made efforts to cancel the loan, but to no avail. The Company started contacting his family members, including those who were not provided as his references. (MD) sent an email to the Respondent giving it a period of ten (10) days to comment or file its answer to the complaint of Mr. Quizon. On 13 July 2022, the Corporate Governance and Finance Department (CGFD)-Monitoring Division to file the Answer/Comment to the instant Complaint within fifteen (15) days, or until April 28, 2023. On April 13, 2023, a conference with the Respondent was held, at which its counsel orally moved a loan and that it was disbursed to his account. However, contrary to his assertion, and as appeared in his was forced to take the loan, how come he was able to complete and submit the requirementsi2. Lastly, suppose Mr. Quizon insists that he was forced to take the loan, or to agree to the terms of the contract, his recourse is not an administrative case such as this case, but a civil case for annulment of the contract. Otherwise, the contract should be upheld and must be followed13. meeting of minds between two persons whereby one binds himself, with respect to the other, to give arising from contracts have the force of law between the contracting parties and should be complied with in good faith10. The Respondent posits that there is no question that a contract was perfected between Mr. Quizon and the former. There is likewise no question that the Respondent has disbursed the loan to Mr. Quizon11. The Respondent got confused as to the claims of Mr. Quizon,claiming that he was forced to take attached annexes, he submitted the necessary requirements for his loan application. If he claims that he something or to render some service. Further, Article 1159 of the Civil Code provides that obligations In its Answer, the Respondent states that under Article 1305 of the Civil Code, a contract is a SUBMISSION OF POSITION PAPER evidentiary weight14. The Respondent added that it had no way to verify if the documents or evidence submitted by the Complainant were authentic or originalis; it had no opportunity to contest such Respondent filed its Position Paper, arguing that the attached annexes/evidence of the Complainants are neither original nor were they properly identified/authenticated. Hence, they should not be given documentsi6; that the original documents were not produced,nor were there any sworn affidavits from the Complainant identifying or authenticating the evidence attachedi7. As such, the Respondent had no opportunity to question the authenticity of the documents/evidence submittedis On May 12, 2023, all parties were directed to submit their position papers. On May 29, 2023, the deciding this case, it will be based on the available documents on record. On the other hand, none of the Complainants filed their respective Position Papers; hence, in ISSUE 18, series of 2019. Whether the Respondent violated R.A.3765 or the Truth in Lending Act and SEC Memorandum No. Paragraph 6 of the Answer dated April 2023. 12 Paragraph 7 of the Answer dated April 2023. 13 Paragraph 8 of the Answer dated April 2023 1 Paragraph 5 of the Answer dated April 2023. 1Paragraph 4 of the Position Paper Paragraph 4 of the Answer dated April 2023 Paragraph 8 of the Position Paper Is Paragraph 5 of the Position Paper Io d. 16 d. 0f Scan the QR to verify the document Page 4 of 8 In the Matter of LHL ONLINE LENDING BUSINESS UNDER THE NAMES AND STYLES OF PAUTANG ONLINE, AND PAUTANG PESO INC. DOING HELD submission of pleadings proves that there was a loan contract executed between the Complainants and the Respondent. Hence, the issue of violating R.A. 3765 and SEC MC 18, Series of 2019, will be discussed. While the issue of whether a contract exists between the parties was raised in this case, the EVIDENCE IN ADMINISTRATIVE RULE CASES ON ELECTRONIC Respondent on the evidence attached by the Complainants. Before dwelling with the issues presented, FinLenD would like to discuss the issues raised by the identified/authenticated, thus it has no way to verify if the documents or evidence were authentic or original; it has no opportunity to contest such documents. The Respondent posits that the evidence submitted by the Complainants was not properly We are not convinced. Company, providing it with an opportunity to contest or verify the attachments submitted by the Complainants. However, contrary to the statements of the Respondent in its Position Paper,nothing in the Answer of the Respondent questioned the attached documents of the Complainants. As the records of the Commission reveal, copies of these complaints were furnished directly to the the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of objections." with the complaints and in its Answers, the Respondent waived the right to assail the pieces of evidence. The right to object to the admissibility of evidenceas held in the case of Catuira vs. Court of Appeals19,is a mere privilege that can be waived. The Supreme Court added, "Necessarily, the objection must be made at Having made no objections to the attachments of the complaints during the period it was furnished bound by technical rules of procedure and evidence. To require otherwise would negate the summary without regard to technical rules. As such, in proceedings before administrative or quasi-judicial bodies, nature of the proceedings,which could defeat its very purpose. Hence,it is proper for FinLend to ensure that there is substantial evidence to prove the Respondent's guilt, even if there is no strict adherence to the proceedings, as stressed in the case of Sibayan v. Alda20. As discussed in the same case, the rationale and purpose for their summary nature are "to achieve an expeditious and inexpensive determination of cases xxx decisions may be reached based on position papers or other documentary evidence only. They are not Rules of Electronic Evidence21 was made. Furthermore, the technical rules of evidence are not strictly adhered to in administrative ADMINISTRATIVE CASES QUANTUM OF EVIDENCE N administrative cases is substantial evidence, to wit: Section 6, Rule 133 of the Rules of Court provides that the quantum of evidence required in amount of relevant evidence which a reasonable mind might accept as adequate to justify bodies, a fact may be deemed established if it is supported by substantial evidence, or that a conclusion." "Section 6. Substantial evidence.- In cases filed before administrative or quasi-judicial 21 Administrative Matter No. 01-7-01-SC, 17 July 2001. 1 G.R. No. 105813, 12 September 1994. 20 G.R.No.233395,17 January 2018 0 Scan the QR to verify the document Page 5 of 8 In the Matter of. BUSINESS UNDER THE NAMES AND STYLES OFPAUTANG ONLINE, AND LHL ONLINE PAUTANG PESO LENDING INC.DOING finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed the acts in the complaint. (Pelaez v.Ganibo, G.R No. 259856 (Notice), [September 5, 2022]] Administrative proceedings are governed by the "substantial evidence rule. This means that a are frowned upon as enunciated in the case of Palao vs Florentino International, Inc.22: In a series of cases decided by the Supreme Court, it held that in administrative cases, technicalities procedural requirements, subject to the observance of fundamental and essential requirements of due process in justiciable cases presented before them. In administrative proceedings, technical rules of procedure and evidence are not [A]dministrative bodies are not bound by the technical niceties of law and procedure and the rules obtaining in courts of law. Administrative tribunals strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense. exercising quasi-judicial powers are unfettered by the rigidity of certain engaged in the alleged actions. operated by the Respondent. FinLenD holds that these constitute substantial evidence that the Respondent All screenshots submitted by the Complainants clearly display the names of the OLPs owned and VIOLATION OF R.A.3765 THE TRUTH IN LENDING ACT OR contracts have the force of law between the contracting parties and must be fulfilled in good faith. of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.Furthermore, Article 1159 of the Civil Code stipulates that obligations arising from Generally, the Respondent argues that under Article 1305 of the Civil Code, a contract is a meeting borrowers in the loan contracts they may execute. enactment of R.A.3765, also known as the TILA, another layer of protection was added to safeguard While FinLenD agrees to these provisions, the Respondent may have overlooked that through the its citizens from a lack of awareness of the true cost of credit to the user by using a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. case of Emata vs. Intermediate Appellate Court24,stressed that the TILA was enacted primarilyto protect In the case of the Development Bank of the Philippines vs. Arcilla,Jr.23,the Supreme Court,citing the true cost of their loan, to enable them to give full consent to the contract, and to properly evaluate their from a lack of awareness of the true cost thereof, proceeding from the experience that banks can conceal such true cost by hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount,and the like. The law thereby seeks to protect debtors by permitting them to fully appreciate the options in arriving at business decisions." where the Supreme Court held that the rationale behind Section 4 of RA 3765 is "to protect users of credit The explanation was then reiterated in the case of United Coconut Planters Bank vs. Spouses Beluso25 defeats the intent of the law. As discussed in the case of Spouses Silos v. Philippine National Bank, G.R. No. 181045,[July 2,2014],738 PHIL156-206, the Supreme Court held: In addition, furnishing the borrower with a Promissory Note after the execution of the contract 22 G.R. No. 186967, January 18, 2017. 23G.R. No. 161397,30 June 2005 24G.R.No. L-72714,29 June 1989 2s.G.R. No. 159912, August 17, 2007. 0 Scan the QR to verify the document Page 6 of 8 In the Matter of. STYLES OF PAUTANG ONLINE BUSINESS UNDER THE NAMES AND PAUTANG PESO LHL ONLINE LENDING INC.DOING AND subject promissory notes after their execution, then they were duly notified of the UCPB further argues that since the spouses Beluso were duly given copies of the terms thereof, in substantial compliance with the Truth in Lending Act. Once more, we disagree. Section 4 of the Truth in Lending Act clearly provides that the disclosure statement must be furnished prior to the consummation of the transaction: writing setting forth, to the extent applicable and in accordance with rules and extended, prior to the consummation of the transaction, a clear statement in regulations prescribed by the Board, the following information SEC. 4. Any creditor shall furnish to each person to whom credit is in connection with the transaction but which are not incident to the extension of (7) the percentage that the finance bears to the total amount to be financed (4) the charges, individually itemized, which are paid or to be paid by such person (5) the total amount to be financed; expressed as a simple annual rate on the outstanding unpaid balance of the obligation. (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; 3) the difference between the amounts set forth under clauses (1) and (2) credit; (6)the finance charge expressed in terms of pesos and centavos;and compliance would defeat these purposes of the Truth in Lending Act. The belated of an already consummated business decision. awareness of the true cost thereof, proceeding from the experience that banks are able to conceal such true cost by hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount, and the like. The law thereby seeks to enable them to give full consent to the contract, and to properly evaluate their options in arriving at business decisions. Upholding UCPB's claim of substantial discovery of the true cost of credit will too often not be able to reverse the ill effects to protect debtors by permitting them to fully appreciate the true cost of their loan, The rationale of this provision is to protect users of credit from a lack of (Emphasis suppliws) discussed, the interest rate provision therein does not sufficiently indicate with spouses Beluso after execution, are not sufficient notification from UCPB. As earlier particularity the interest rate to be applied to the loan covered by said promissory notes. In addition, the promissory notes, the copies of which were presented to the 210 days. However, in reality, the consumer or borrower is given a shorter period to repay, and hidden surcharges and interest for failing to settle the loan within this shorter timeframe undermine the noble intent of the law,which aims to make borrowers aware of the true cost of credit In this case,the Respondent stated in its disclosure statement that the loan term is for 150,180,or term of 180 days; however, the first payment was scheduled for 07 January 2023-just 18 days after the does not specify when the first payment is due or provide a breakdown of the payments. This information amounting to Eight Thousand Pesos (PhP8,000.00), dated 25 December 2022.The application shows a loan loan was taken, requiring a repayment amount of P10,055.00. The next scheduled payment due date was set for 22 June 2025, with an amount of P100.00. A careful evaluation of the loan agreement reveals that it only became visible after the loan agreement was finalized. Additionally, Ms. Baldad's complaint includes screen captures of her application for a loan 0 Scan the QR to verify the document Page 7 of 8 In the Matter of LHL ONLINE LENDING INC DOING PAUTANG PESO BUSINESS UNDER THE NAMES AND STYLES OF PAUTANG ONLINE AND appears to be 210 days, with a loan amount of Six Thousand Pesos (PhP6,000.00) taken out on 30 April 2022. However, by the end of May 2022, he was expected to repay nearly the entire loan amount. To comply with the terms, the Respondent collected the remaining amount of P100 at the conclusion of the 210-day period. Mr. Quizon experienced a similar situation. Based on the submitted documents, his loan term they enter into,has been undermined by the Respondent's deceptive practices. Worse still,borrowers were misled into agreements through misleading information that made them appear to be wise choices, when in fact they were not. The intent of the law, which is to ensure that borrowers are well-informed about the agreements borrowers and to impose lawful interest;however, it also has a responsibility to comply with existing laws and regulations when exercising these rights. The Complainants have reported similar experiences with requirements for loan agreements are met. The Respondent has the right to collect repayments from the same company. While contracts create obligations for both parties, it is essential that proper disclosure rates, but to make those rates more understandable, comparable, and accessible to borrowers. usage and, in compliance with the TILA, has adopted Bangko Sentral ng Pilipinas Circular No. 730 (BSP Circular No.730 dated 20 July 2011.BSP Circular No.730 aims for transparency in pricing, not to limit Under MC No. 7. the Commission is committed to protecting borrowers from uninformed credit MC No. 7 provides for the penalty for non-compliance, to wit: a First offense:Basic fine of Php20,000.00 and Php 100.00 for each day of continuing b. Second offense:Basic fine of Php25,000.00 and Php100.00 for each day of continuing violation; d C Lending or Financing Company. Third offense: Basic fine of Php30,000.00 and Php 100.00 for each day of continuing Fourth offense: Suspension /revocation of Certificate of Authority to Operate as a violation; violation; and Respondent separately. Three complaints are tantamount to the commission of a third offense. The penalty of One Hundred Pesos (PhP100) for each day will be computed based on the loan term of each contract. was committed by the Respondent, each complaint will be given credence and taken against the Given that the Complainants have sufficiently proved by substantial evidence that the violation executed with a term of 210 days; then, the contract of Mr. Alejo will be considered the second offense,with a 150-day term;and lastly,the contract of Ms.Baldad,with a 180-day loan term,will be considered the The complaint of Mr. Quizon will be considered the first offense, as this was the first contract third offense.The computation will be as follows Ms. Baldad Mr. Alejo ComplainantBasic Penalty Mr. Quizon P25,000.00 P20,000.00 P30,000.00 Penalty each day (100 x loan term) Total Penalty P 15,000.00 P18,000.00 P21,000.00 TOTAL P129,000.00 P41,000.00 P48,000.00 P40,000.00 VIOLATION OF SEC MC 18,SERIES OF 2019 activities. However, upon careful evaluation of the complaint form and attachments, these complaints cannot sufficiently prove that harassment was present in the act of collecting the loan receivables. Complainants allege that the Company also violated SEC MC 18, in its conduct of collection 0 Scan the QR to verify the document Page 8 of 8 In the Matter of. STYLES OF PAUTANG ONLINE, AND PAUTANG PESO BUSINESS UNDER THE NAMES AND LHL ONLINE LENDING IC DOING is only substantial evidence6. More than a mere scintilla of evidence, substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable might conceivably opine otherwise. The requirement is satisfied where there is reasonable ground to believe that the respondent is guilty of the act or omission complained of, even if the evidence might not be overwhelming27 As discussed, in administrative proceedings, the quantum of proof necessary for a finding of guilt taken by the Respondent in violation of SEC MC 18. Complainants in this case failed to prove by substantial evidence that the harassment was indeed violation of the same act shall cause the Commission to revoke its primary registration and Certificate of names and styles of Pautang Online and Pautang Peso, is hereby ordered to pay the amount of One Hundred Twenty-Nine Thousand Pesos (P129,000.00) within ten (10) from the release of this Order for its violation of R.A.3765, or the Truth in Lending Act. The Company is hereby warned that subsequent Authority to operate as a lending company WHEREFORE,in view of the foregoing,LHL ONLINE LENDING INC, doing business under the likewise be furnished with this Order for their information. Technology Department for their information and appropriate action. Complainants in this case shall Let a copy of this Order be furnished to the CRMD and the Information and Communications SO ORDERED July 2025 Makati City, Philippines. C ATTY.KENNETHOV/A.QUIMIO uMM OlC-Director U MmM 26 Macaventa v. Nuyda, A.C. No, 11087, October 12, 2020 27 Diaz v. Ombudsman, G.R. No. 203217. July 02, 2018 0 Scan the QR to verify the document