Taming the digital loan sharks
No matter what you do, loan sharks refuse to go away. They come back in different forms, sometimes better equipped with technology and find smarter ways to circumvent rules. The cropping up of ‘fraudulent’ digital loan apps is the price the country is paying for fast digitisation and high mobile services penetration. While financial literacy in the country remains low, access to loans and other financial products is easier, thanks to mobile apps. Many shady fintech firms used the app to reach out to people needing easy loans.
While signing up for them, the customers give access to their phone data—from pictures to contact lists. After loan disbursal, the borrower is ‘blackmailed’ into repaying the loans at exorbitant interest rates, sometimes ahead of the repayment schedule. There are cases where borrowers’ morphed pictures were shared with their phone contacts to pressure them into repaying the ‘loan’ at the lender’s terms and conditions. In some instances, harassed borrowers took their lives.
While the enforcement agencies have been cracking down on many such loan apps, it is time the government and various regulators come together to curb the unchecked growth of these app-based lending entities. The government and the RBI have woken up to this menace and recently announced a few steps—like coming up with a white list of authorised apps, cancelling the registration of dormant NBFCs and eliminating shell companies by RoC. The RBI also came out with digital lending guidelines to protect the data of borrowers using digital lending apps from being misused.
However, it must not be lost on the authorities that this war is to be fought on multiple fronts. App stores have a big part to play in ensuring they bar unscrupulous loan apps and ensure genuine-looking apps do not turn rogue. Unfortunately, app stores have expressed their inability to track the activities of the loan apps continuously. The government may have to think out of the box to deal with these criminals, who are not just technologically well-equipped, but may be financially savvy, too. Maybe, it is time for a separate grievance redressal cell that works and responds quickly to any financial frauds.