ATM Loans Or Sangla

Looking people's input and/ or experience with this scheme.
Perhaps this scenario is familiar; A young woman working in Manila making around ₱18k per month which her employer pays into a debit card issued by said employer. A few family emergencies come up, her mom has a serious medical issue: (A prolapsed uterus, causing much discomfort and pain.) With her monthly rent, daily food and transportation and sending money home to take care of her kid's needs, there's already not a lot of extra money, (actually, NO extra money each payday.) So her co worker says she'll lend her money against her ATM. Apparently, being in a tight fix, and not being stellar at math, she agrees to the loan of ₱40,000 @ 20% interest. Now, a number of months later, she still doesn't have her ATM card and the debt has ballooned to ₱60,000 and ₱12,000 per month is going only for the interest. In the meantime, she has borrowed from other people, and online loans, just to survive. Now, she's in very deep and no real way out of her situation. She no longer has credibility with her peers, or loan companies. Her family still has their daily needs, she still needs to pay off the debts, rent, daily living expenses, etc.. I guess my question is, how common is this situation in the Philippines? I was going to put this in the banking/ finance, but that's for the Expats, so I hope this is suitable where I put it.

Respectfully,
Brandon

 

Sadly I do not have much input for you. There are many schemes that prey on poor people.

Here is an article stating the scheme is not illegal because a 1982 law limiting interest rates has been suspended.

https://www.rappler.com/nation/157955-5-6-loan-sharks-arrest-without-warrant-doj

On the other hand the article states: "But we could not accept that kind of interest. When it comes to civil cases, the courts do not recognize such excessive interest rate,"

So she does not have to worry about the loan shark taking her to court. The loan shark may make other threats.

From what I read the shark gets the ATM card but not the password. This way the borrower can go to the bank and still withdraw their salary. She can also tell the bank the card has been lost or taken by a loan shark and request it be blocked and a new card issued to her.

20% per month is absurdly high and she will become trapped. A person can make an argument that the loan shark made the loan in good faith and she should pay some or all of it back. My opinion is that the shark intended to trap her in a scam and therefore does not deserve anything back.

Has she already paid back 40K in payments? You stated that a few months have passed and she has been paying 12K per month on the interest.

 

I've heard this loan shark business is one of the better ROI businesses in the Philippines, if you can stomach the collection part and the risk. People lose homes, property and other items of value. This is similar in nature to the pawn shop business. Sad that survival can come to this.

 

for those interested in this topic; an interesting article in Manila Inquirer from today
https://opinion.inquirer.net/125013/unconscionable-lending-rates
seems people who do not need to lend money are aware of this problem, people who need money have no knowledge about rampant interest rates. a common problem in this country, I guess.

 

Been going on for many, many, many ..........years, just like 5/6.. But the sharks have a lot of intimidation techniques. Because sometimes they are c0*’s or their family members. She needs to report this as soon as she can or they will take everything she has and if they know where her family is they will send people to them to try to get stuff to, they will take anything of any value! The bank will change her card but the only way she will ever get out from under these people is to go to the police station and file a report. That might keep her safe for a little while but depending on how big this operation is she could be in a lot of danger and might want to think about relocating? These people will never stop till they get what THEY think they are owed, she might get lucky and be able to make a deal with them to make payments for the rest of her life? And to top it all off I am sure that someone she worked with set her up and they are in on the hole thing, that is why it will be hard for her to get away from them because she probably doesn’t even know they are connected!!!! She is not in a good place and if I were you I might accidentally loose her #!!!! You don’t want to get caught up in any part of this!!! Just my 2 cents, Good luck

 

By my estimate, she's already paid it back and then some. Her original loan amount was ₱45k. Her monthly payments since May, have varied because she has taken double the amount at times and still no impact in the principal. The amount she still owes has gone up to ₱60K. Even if she paid an average of ₱10k per month, she's already paid ₱60K since May. She's actually paid more than that at times.
She doesn't want trouble with the lender because she works with her at the same office. She said the woman will fight her every day. She said the woman quarrels with her own brother in the province and talks about having him killed. So, not a good situation for her.

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