Vicious Debt Cycle Of Instant Loan Apps

Telangana police have so far detected 1.4 crore transactions worth Rs 21,000 crore
Vicious Debt Cycle Of Instant Loan Apps
Vicious Debt Cycle Of Instant Loan Apps

Applying for a loan can be a cumbersome process at times, there are a bunch of checklists, which needs to be checked, from your end as well as from the bank's end, before a loan can be approved.

Like every other millennial problem, we do have a solution for it, there are dozens of apps available on Playstore and App store, which can be used to avail a loan, ranging from few hundred rupees to few lakhs. You need to fill up your Aadhar and Pan card number, and within an hour your money will be credited into your bank account.

It sounds like rainbow and sunshine, till the time you don't fail to repay your debt, apps like these have been accused of harassing people, to the extinction of taking their own life. Within the span of a few weeks, five people from Telangana decided to end their lives. Majority of victims were IT professionals.

Operations and allegations

Telangana police instantly started probing into the case. As of now they registered almost 50 cases and arrested 29 people, including three Chinese nationals, The prime accused Zhu Wei, alias Lambo, was arrested from the Delhi airport on December 30th, minutes before he was about to board a flight to Frankfurt which would have taken him to Shanghai. He is the brain behind the whole operation, set up 'Digipeergo Tech' in December 2018. The other two were Yi Bai, AKA Dennis who handled operations in India and was residing here from February 2019 on a business visa. The last one is Liang Tian Tian, she ran a call centre in Pune on behalf of these loan apps, married an Indian in 2013 and has lived here since 2016.

Telangana police have so far detected 1.4 crore transactions worth Rs 21,000 crore. The funds have been allegedly routed to shell companies in Beijing and Singapore, the same money was also used to run an online gambling racket which was busted earlier in August. The main accused Lambo has been arrested with charges of running an instant scam loan application and extortion. He was in charge of the four companies which developed mobile apps offering instant loans at high-interest rates. These apps were developed, with the help of a Singapore based developer. Lambo ran the scam through call centres in Gurugram, Bangalore and Hyderabad.

What is the Modus Operandi?

They operated by luring customers under the context of 'hassle-free instant loan'. Once the customer signs up, the app asks for a few permissions which include access to your gallery, contacts, messages and such.

While crediting the amount, loan apps would credit large amounts into customers' bank accounts without their consent, trapping customers under a vigorous debt trap. When you fail to repay the amount you are introduced to, with the whole set of interests, a short payment window and hidden charges are preposterously high. For reference, it can be around 40 per cent, 50 per cent or even 100 per cent in some cases. After that, you and your contacts (of which they got access from your device) can expect a ton of calls and texts throughout your day. Your morphed images being shared with your contacts, bogus legal notices, defaming you and such stuff.
The Hyderabad Commissioner carried out raids at call centres in the city as well as in Haryana's Gurugram as part of the probe. The police, at a press conference, informed that hundreds of employees were assigned with the task of calling up customers, harassing them for not repaying the loan, insulting and harassing them online, and even threatening them. They also seized 700 laptops, servers and computers from these call centres.

In several cases, these apps or corporations have not even been registered or recognised by Reserve Bank of India as a Non-Banking Financial Company (NBFC), further said, the police. The Cyberabad Police, in charge of Hyderabad's IT hub, arrested the directors of Onion Credit and Credfox Technologies.

Commissioner Kumar has also said that the issue will be taken up with tech giant Alphabet Inc. (which owns Google) as part of further inquiry, as the apps are available on the Play Store and would request them to take it down.

The most recent complaint was registered on Saturday at the Saidabad Police Station after a borrower reported that an app-based instant loan provider had threatened him and his relatives. The man borrowed an amount of Rs 30,000 from an app called 'MY BANK' and, according to the police, was asked to pay Rs 55,000 within a week.

Meanwhile, the RBI acknowledged the reports of individuals falling prey to these apps, charging preposterously high-interest rates, and adopting 'unacceptable and high-handed recovery method' and misusing agreements to access data on the mobile phone of borrowers.

'Members of the public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company/firm offering loans online or through mobile apps', the central bank said in a statement. It also said legitimate public lending activities can be undertaken by banks and NBFCs registered with the RBI and other entities who are regulated by state governments under statutory provisions.

The police are continuing their probe into cases related to this and have advised individuals not to download any random quick loan offering apps without performing rigorous background checks.

The need for an hour is to modernise police to meet cyber threats and a robust data privacy policy that safeguards users from online abuse.

The author is Tech-Enthusiast and a Blogger

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