Govt teams up with RBI, e-lenders to crack down on fraud loan apps
Google says it has removed hundreds of personal-loan apps as they violated user safety policies
The Centre and state governments, Reserve Bank of India (RBI), big-tech firms and regulated digital lenders are coming together to crack down on fraud Chinese lending apps operating in the country with near impunity and wreaking havoc in the lives of borrowers.
On Thursday, Google said in a blog post that working on complaints by users and government agencies, it reviewed “hundreds of personal loan apps in India”, and those that were found to violate its user safety policies “were immediately removed from its Play Store.”
“We have asked developers of the remaining identified apps to demonstrate that they comply with local laws and regulations. Apps that fail to do so will be removed without notice. We will continue to assist the law enforcement agencies in their investigation of this issue,” wrote Suzanne Frey, vice-president, product, Android Security and Privacy. Google’s announcement came a day after the RBI constituted a committee to suggest ways to fight frauds and unscrupulous digital lending practices. Various states have also started to clamp down on these lenders, commonly known as “Chinese lending apps”. But it would be wrong to assume that only Chinese nationals run these shady lending practices. Scores of Indians are involved, too.
A user just needs to download any app floated by such fraudsters and apply for instant loans. These apps are mainly concentrated on Google Play Store because of the reach and popularity of Android systems. If an app is flagged, it simply vanishes from the Play Store, only to be replaced by another one. But the underlying companies remain intact, and these are not small setups.
The Hindu Business Line (HBL) reported on December 23 that the Cyber Crime police of Hyderabad raided three centres running such operations in Hyderabad, and two in Gurugram. These firms employed more than 1,100 tele-callers taking instructions, apparently from Chinese nationals operating from Jakarta, Indonesia.
The police raided Liufang Technologies, Hotful Technologies, Pinprint Technologies and Nabloom Technologies, all registered in Bengaluru. Their purpose was to “persuade, harass and intimidate loan defaulters at various stages”, Commissioner of Police Anjani Kumar was quoted by the HBL in the story.
When the application is installed on the phone, it accesses various aspects of the smartphone. The user has to give access to the contact list, messages, and other vital information stored on the phone. The loans are instantly given. The Chinese apps can offer ~500 to ~50,000 at 100 per cent to 800 per cent interest rates for tenures of seven days to six months.
If there is a delay in repayment, or default, the tele-callers start harassing customers. There are persistent threats, not only to the borrowers but to those on their contact lists as well, especially family. If those tactics fail, recovery agents are sent. The agents, usually goons masking as finance company employees, rough up customers and snatch personal belongings.
According to a source in thick of fighting the menace, “apart from very deep-pocketed foreign nationals, there are hundreds of Indians involved. These companies don’t borrow from banks but use their funds to lend. They are not registered with the RBI and don’t maintain accounts with a single bank. Most of the time, the accounts where the money gets submitted is in the names of relatives or shell companies.”
Besides, professional recovery agents' services have cropped up all across the country. “They are goons on hire. They don’t work for one company but go by the lists given to them. If they recover the money, they earn fat commissions,” said the person.
If foreign nationals are handling the operations, the money gets routed out of India through an elaborate web of shell companies, including through companies registered as infrastructure non-banking financial companies. Hawala routes are also regularly used, informed the source.
Digital lenders have come together to form bodies such as Fintech Association for Consumer Empowerment (FACE) and Digital Lending Association of India (DLAI) to fight the Chinese lending apps.
“During the pandemic, there was a flush of these lenders, having their roots in Indonesia, or China. They came out with multiple apps, which were being run by a group of 2-3 entities. Their strategy was to not build a brand so that they remain unnoticed on a larger scale. Since there was a demand for credit in the market, which was largely unmet, we saw such lending platforms mushroom,” said Madhusudan Ekambaram, chief executive and co-founder of personal loan platform Kreditbee.
According to Anil Pinapala, founder and chief executive of Vivifi India Finance, when a lender is operating from outside the country, the enforcement actions have to be continuous. “There is a sense of responsibility on Google also. They have their policies and they have their mechanisms by which they try to regulate such apps. But previously they did not insist on making sure that lending apps have a valid licence. So, that was one of the deficiencies that Google had,” Pinapala said.
Ranvir Singh, founder and managing director of digital lending platform Kissht, said there should be a framework on what personal information could be captured so that customer information cannot be used unscrupulously.
“A lot of these companies have a track record of doing similar things in Indonesia till the authorities clamped down on them. And, now, they are doing a similar thing in India. Most of them are operating out of China without being physically present here,” Singh said.
It is difficult to close such operations altogether, experts said. The best way to safeguard against these practices is more education and self-awareness.
“At the time of taking the loan, ask yourself: Do I need this loan? Can I afford to repay it? Understand the interest rate, processing fee, and any other hidden charges that might be there. Are those charges acceptable to you,” said Gaurav Chopra, founder and chief executive, Indialends, and executive member at DLAI.
“Think before giving any permissions to these applications or websites. Ask yourself: Why does the lender need these pieces of information at all for lending to me,” Chopra said.