Such apps charge customers as high as 500 percent interest rates and use extortion methods to collect money from borrowers or loan defaulters, according to a report by community driven social media platform Local Circles.
Many consumers said, instant loan apps generally charge 30-60 percent interest rate against a loan of Rs 3,000-5,000, and accordingly interest rates vary as per the loan amount and duration to pay back the loan. During the peak of the pandemic, some platforms reportedly charged as much as 400-500 percent interest rate. Also, over half (54 percent) of the citizens experienced extortion or data misuse during the collection process, it said.
Globally too, tech major Google has blocked hundreds of apps from its Android store to protect borrowers from “deceptive and exploitative terms”.
The main factor that take people to these apps is easy processing of loans without any surety. Details such as copies of Aadhaar card, voters ID and Pan Card submitted while loan processing can be misused. Most importantly, contacts and photos stored in victims’ mobile phones were found misused, as per various reports. Proliferation of smartphones and cheap data plans needlessly, helped in driving the process, it said.
RBI Governor Shaktikanta Das also cautioned people about many such “illegal” digital loan lending apps, and therefore if people have complaints related to such entities, then they should lodge police complaints.
The maximum number of complaints has been filed in Maharashtra, followed by Karnataka, Delhi, Haryana, Telangana, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu, and Gujarat, according to the RBI report.