Jatin (name changed on request) borrowed INR 15,000 from a micro-lending app last year because he couldn't keep up with his bills after losing his job as a gym trainer during the Covid-19 lockout. The terms were straightforward and matched his needs: he didn't have to present proof of income, and his credit score would be ignored if he paid INR 5,000 within eight days.
The 27-year-old missed the payment due to a lack of consistent income.
For Jatin, what happened next was nothing short of a nightmare. The Gurugram resident recalls, "My phone just won't stop ringing all day." "Agents bombarded my Whatsapp with threats and abuse." They even threatened to publicly defame me if I didn't pay right away. They accomplished it! I thought it was just a threat!"
The company obtained Jatin's friends and family's contact information from his phone, which he gave permission to while filling out a loan application, and sent them messages on Whatsapp and Facebook labelling him a cheat. He gathered monies to pay the initial INR 5,000, embarrassed and apprehensive. The hounding, however, was far from ended.
"By then, I'd missed the second instalment and they'd slapped a big default fee, so the harassment just grew worse," he says, adding that borrowing money from his parents in Aligarh (Uttar Pradesh) was out of the question because they rely on Jatin.
"I was so fed up that I considered going into hiding or committing myself."
Jatin's situation is not unique. In the last few months, several incidents have surfaced in which borrowers who were unable to withstand the pressure and social shaming from agents of app-based lenders took their own lives. A screenshot of a Whatsapp exchange between an agent of the loan app 'Udhaar Loan' and a lady borrower went viral in one such example, in which the former sexually harassed the woman after she failed to make a payment on time. As a result of the sexual abuse, the woman allegedly attempted suicide.
The Illegal Chinese Moneylenders
Digital lenders backed by non-banking financial corporations (NBFCs) or partnered with banks are not these businesses. They are illegal moneylenders who utilise technology to construct and publish an app on the Google Playstore but are not registered as a legal entity, comparable to offline lenders who target low-income communities with restricted access to banks for micro-loans.
Most of these apps are hosted on Chinese servers with familiar Indian names to project that they are locally registered companies, according to research by Cashless Consumer, a citizen-led effort that raises awareness about digital transactions.
Micro-lending apps have been around for a while, but they gained traction during the Covid-19-induced lockdowns, when demand for loans rose as a result of job losses. As the number of applicants grew, so did the number of complaints on social media about unfair loan collecting practises and exorbitant interest rates. The reports of alleged suicides were the final nail in the coffin that drew the regulator's and Google's attention.
According to L Srikanth, a fintech researcher and coordinator of Cashless Consumer, the internet giant has taken down close to 450 such loan apps from its playstore so far, out of a total of 1,300 thought to be operating on it.
To protect consumers from fraudulent and exploitative personal loan arrangements, Google has a policy against platforms that offer high-interest loans. However, for Google to take action, the corporation must be breaking state and local laws in any region or country, despite the fact that the majority of rapid lending apps aimed at Indian consumers are hosted on Chinese cloud.
Furthermore, Google Play is simply one of the many distribution options. "They actively sell themselves on mobile ads (on games, apps), Youtube, TikTok, and other platforms," Srikanth explains. There is no systematic means to sort the wheat from the chaff and police the miscreants because digital lending via mobile applications operates in a regulatory vacuum in India.
Following allegations of claimed deaths connected to harassment by app agents, the RBI has established a six-member working group to regulate digital lending apps, focusing on consumer safety, privacy, and data security.
What the Customer Should Know
Quick loan digital platforms often lend for ultra-short periods of 15-30 days at exorbitant interest rates that come out to a whopping 60% or more at the conclusion of the loan tenure. At INR 20,000, the typical loan ticket is less.
Customers should be aware of other red indicators, according to experts.
"Unlike legitimate lenders who carry out a proper KYC (know-your-customer) process, dishonest lenders offer credit without carrying out identity verification or income proof," says Anuj Kacker, co-Founder of MoneyTap and secretary and chairman - website and communication, Digital Lending Association of India (DLAI).
"Another method they do is to set an application deadline that creates urgency and encourages the borrower to act without conducting due diligence," Kacker adds.
Borrowers can check the lender's validity by going to its website.
"Most unlawful lending apps don't have a website," says Vivifi India's founder and CEO, Anil Pinapala. "If the website is listed, the borrower should check to see if the company is registered with the RBI, works with a bank, or is an RBI-registered non-bank financial company." The same is readily displayed by all legitimate lending organisations, together with their Company Identification Number (CIN) and information of their RBI Certificate of Registration (CoR)."
Furthermore, if the company claims to be collaborating with an RBI-registered NBFC, buyers should double-check the NBFC's website to see if it's an authorised partner before installing the app, according to Pinapala.
A dubious privacy policy on a website or app, according to Srikanth, is another symptom of fraud. "The details of the grievance officer are either left empty or provided with incorrect details under the privacy policy section," he stated in a Medium post.
Conclusion
There's no need to be discouraged if your personal loan application is turned down. To boost your chances of loan approval, simply work on improving your credit report and following the methods outlined above. Once you've completed this checklist, you're ready to submit your personal loan application.To find about the best pricing and deals, call our toll-free number +91-9477079053. They'll help you in every way they can. Please contact me at Instant Loan if you have any more.