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India
oi-Prakash KL
New Delhi, Jun 5: The number of complaints pertaining to scams involving loan apps has gone up exponentially in 2021 and 2022. Thanks to the smartphone craze and dirt-cheap data plans, people, who are in need of money, are falling prey to unauthorised loan apps.
Modus Operandi
People are lured by promising a higher loan amount without paperwork. Customers will get the money instantly but less than the promised sum. As the customer installs the app, it will have access fo sensitive information of the customer.
It will gain access to phone contacts, gallery and other information. Using this information, the company will adopt harsh recovery tactics. The loan agents will abuse and harass the customers and will go up to the extent of calling the friends and relatives of the customers from their contact list.
In some cases, customers died by suicide after cyber fraudsters allegedly circulated morphed photos for failing to repay loans taken through an instant loan mobile app.
RBI Findings
A Reserve Bank of India (RBI) Working Group on digital lending said in a report that as many as 600 “illegal loan apps” are there in several app stores for Android users in India. A total of around 1,100 unique Indian loan apps that have the keywords such as loan, instant loan, quick loan, etc, are available in the App stores.
With an aim to prevent illegal digital lending activities, RBI has proposed the Government of India to formulate a new legislation. The details have been mentioned in a report of the RBI Working Group on digital lending including lending through online platforms and mobile apps.
“As per the findings of the WG, there were approximately 1100 lending apps available for Indian Android users across 80+ application stores (from January 01, 2021 to February 28, 2021),” the RBI report said. “No. of App Stores in which Indian loan apps are available ~81. No. of unique Indian loan apps that have the keywords: loan, instant loan, quick loan, etc. ~1100. No. of illegal loan apps ~600,” it added.
The maximum number of complaints have 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.
Important Points to Consider Before Taking Loans from Online Apps
Is the Lender Approved by RBI?
The first and foremost thing that a customer should do before applying loans on apps is whether or not the company is approved by the Reserve Bank of India. It ensures that you do not land in problems pertaining to repayment as the companies which do not follow the RBI guidelines are expected to harass the customers once taking loans.
Does the Lender Have a Website and Physical Office?
See whether the lender has a proper website and whether it has mentioned all the details about the company. More importantly, see whether the lender has a physical office. Most scammers do not have websites or physical office.
Check Reviews
Also, check reviews by customers which give you a fair idea about the lender. And avoid taking loans from apps without verify badge. Find out whether the app is associated with a bank or non-banking financial company (NBFC) and vice versa.
Terms and Conditions
Many of us tend to ignore the section ‘Terms and Condition’. Studies have shown that most people pay attention to ‘terms and conditions’ without realising that it is an agreement which acts as a legally binding contract between you and the company. So, always read ‘terms and conditions’ especially when you are doing financial transactions online.
Look Beyond Interest Rates
There have been reports about individuals/small businesses falling prey to growing number of unauthorised digital lending platforms/Mobile Apps on promises of getting loans in quick and hassle-free manner. These reports also refer to excessive rates of interest and additional hidden charges being demanded from borrowers; adoption of unacceptable and high-handed recovery methods; and misuse of agreements to access data on the mobile phones of the borrowers. Hence, find out all the charges charged by the app like pre-payment, processing fees, etc.
Don’t Get Loans Without Credit History
People should not take loans from apps that are ready to give loans without taking your credit history into consideration and are willing to sanction immediately. Never pay money to get loans sanctioned. “The processing fee is usually billed to you as part of your loan or to be paid directly to the bank on NBFC offering you the loan. If you are being asked to pay a part of the loan upfront for processing or required to pay cash or transfer money to any personal account, it is a red flag,” The Times of India quoted Adhil Shetty, CEO, Bankbazaar, as saying.
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