How To Protect Yourself From Fake Apps Offering Loans
As more and more people use smartphones now, mobile apps have become a ready help in many ways. But, of late, there have been many cases of fraud through mobile apps, primarily to steal people’s money.
In one of the latest such cases, Delhi police arrested 18 people on charges of extorting money from people after offering them short-term loans at low rates through mobile apps. They reportedly ran a call centre to provide cheap loans.
Lured by instant loans at low rates and minimum documentation for processing the finance, people in desperate need of money often fall prey to such traps.
These people are also ignorant of the risks involved and find these apps convenient to approach instead of large banks that demand more paperwork.
The Reserve Bank of India (RBI) allows legitimate public lending activities by registered banks and Non-Banking Financial Companies (NBFCs) or other entities regulated by the state governments.
In the public interest, given rising fraud cases, the central bank, in a press release on December 23, 2020, said digital lending platforms must disclose the name of the banks and NBFCs on whose behalf they have been operating upfront to customers. However, despite RBI rules, fraudsters still find ways to cheat people.
How Does Fraud Happen?
It starts with an easy loan offer and sometimes without credit verification. You may think it saves you from the hassle of paperwork in a regular bank, but, in reality, it may lead to a serious problem or danger.
Usually, when one downloads the app for taking an instant loan, the application asks you to grant access to contacts and pictures in the phone and upload documents, such as an Aadhaar card, PAN details, etc. Generally, the loan disbursal is quick. But one must be careful while downloading the app, responding to calls or sharing personal data to avoid potential traps. Moreover, some loan apps do not follow RBI rules and use extreme measures for loan recovery.
When Does The Problem Arise?
The problem starts when you don't pay back the loan on time. In such a case, the borrower could face threatening calls and other harassment for the delay in repayment. It could include daily abusive calls and fake legal notices.
Also, they could misuse personal information, such as photographs and contact numbers stored on the phone, to intimidate the borrowers. Sometimes, they ask to take more loans to repay the existing ones, and that's how the customer gets trapped in the cycle.
How Can You Save Yourself?
Taking a loan isn't a bad idea, but from whom you are taking the loan is important. Mobile apps are the new way of executing many daily tasks today, and you cannot completely avoid them. To protect yourself from fraudulent apps, you must be alert enough to notice the red flags quickly. These could be zero verification of your repayment history, hidden charges, asking you to act immediately, and no lender's physical address.
So you must ensure that the lender follows all the RBI regulations. Also, another critical aspect that is often overlooked is to check the app details before approving and giving access to your personal data. Yet, frauds happen, so the first thing you should do is to inform the police or report a complaint online.