The trap is just a click away
Loan apps lend money without documentation, but charge high interest rates, harass and blackmail to extort more from borrowers.
Tejas G, a 22-year-old mechanical engineering student at a private engineering college in Yelahanka in Bengaluru, had borrowed money from a loan app to help his friend. To repay the loan, he raised another loan from another app. He kept paying interest but could not repay the loan. The interest increased and so did the harassment by the lenders. On July 11, he left a note seeking apologies from his parents and stated that he was unable to bear the harassment by the loan sharks, and ended his life.
Nanda Kumar, a 55-year-old employee of a cooperative bank, started receiving morphed obscene pictures on his phone. The senders were threatening to upload them on the internet, besides sending them to his family and friends. Fearing this, he came under a moving train near Kengeri, in July last year. Borrowing loans from random lending apps drove him to take the extreme step.
In both these cases, neither of the victims had borrowed lakhs or crores of rupees, but just a few thousand. However, it was the huge amount of interest they were made to cough up by loan sharks, topped by blackmailing to extort more from them, that put them under pressure. The debt/death trap was just a click away.
With the Covid-19 pandemic came financial distress, as lakhs of people lost their jobs. During this period, predatory loan apps gained entry into the world of micro-financing. The apps, which were easily downloadable from app stores grabbed the eyeballs of people on social media platforms. It seemed lucrative as they offered loans without any documentation, and that’s how many walked into the trap. As most of these apps had links to China, where they were being operated and monitored from cloud-based servers, the apps were also called ‘Chinese loan apps’.
Taking a cue from these apps, Africans started similar ones, and even Indians designed hundreds of predatory apps. With the intervention of law enforcement agencies, several apps were pulled down from the Google Play Store and the App Store (iPhones). To control the menace of these loan apps, the RBI gave a list of Digital Lending Apps (DLAs) run by regulated entities so that only listed DLAs are hosted on these stores. After a lull, the predatory loans made a backdoor entry via third-party app stores. They also started sending messages on apps like Telegram, to reach out to potential borrowers.
How do these apps operate?
“They specifically target financially vulnerable individuals, often those plagued by a poor credit history or facing financial hardships. To identify potential victims, they employ tactics such as advertising on search engines like Google, focusing on keywords like ‘quick loan’, ‘loan without collateral’, ‘fast loan’ or Rs 10-second loan’. These apps entice borrowers with the promise of quick and hassle-free loans, and minimising or eliminating the need for extensive paperwork.
Once borrowers are lured in, these unscrupulous app handlers impose exorbitant interest rates and fees, frequently in the range of 23% to 30% per week. In pursuit of repayment, they also incessantly call at all hours, send intimidating messages and even issue threats to harm the borrower or their family members. They go further by contacting the borrower’s friends and relatives, sending fabricated legal notices and falsely claiming that these contacts are guarantors, subject to legal action via fraudulent court orders,” explained Ananth Prabhu G, a cyber security expert in Mangaluru.
“These apps may also exploit personal data collected during installation, which often encompasses access to the user’s gallery, contacts, SMS messages, location, camera and more. Due to their illicit nature, these apps lack legitimate payment gateways, causing borrowers to make repayments to a provided GPay ID, frequently leading to repeated harassment tactics, falsely claiming that payments haven’t been credited and coercing multiple payments from victims. Some fraudulent loan apps may engage in phishing attempts, where they trick borrowers into providing sensitive information such as banking credentials, passwords or personal identification. There are occasions when these apps deposit funds into the account of individuals who have installed the app, without requesting a loan. Such strategies are employed to intimidate individuals who are merely inquisitive about the app and decide to install it on their devices,” he said.
Interest begins to mount
“Taking advantage of people’s immediate requirement for money, predatory loan apps are luring people with easy access to loans without any documentation. You get the money instantly but what follows is sheer harassment,” says DIG SD Sharanappa, Joint Commissioner of Police (Crime), Bengaluru city (who was transferred last week).
“In a hurry to avail instant loans, borrowers give apps access to their contacts and media without realising the consequences. ,” he said. The lenders are happy till the borrower keeps paying the interest. If one fails, the trouble begins. Starting with sending lewd or abusive messages to the borrower and his contacts, the loan sharks go to the extent of creating obscene images of the borrower and sharing them with his/her contacts. “It is a vicious circle. First, they give loans amounting to a few thousand rupees and charge so much interest that the borrower is not in a position to arrange money. Then, they only guide you to install a similar app to arrange funds, which charges much higher interest. So once a person falls into the trap, it’s a difficult task to come out of it,” said Sharanappa, adding that most of the victims in such cases are from low-income groups.
“Not only illiterates, even educated people have also fallen prey to the apps, inviting a wave of threats, blackmail and harassment, in Belagavi. It was their curiosity to avail the loan easily and instantly which victimised them,” said Sanjeev Kamble, police inspector, Cyber, Economic & Narcotics (CEN) Crime police station in Belagavi. In just three cases, the loan sharks extorted Rs. 43 lakh in total, he says, adding that victims have slipped into depression because of it.
While advising people to be wary before downloading such apps, a senior officer in the Cyber Crime Division in the Criminal Investigation Department opined that it’s nearly impossible to stop such apps.
“No matter what we (police) or the governments do, with fast-changing technology, they (apps) find ways to reach people. Many apps which were pulled down from application stores are back with different names. It’s a constant battle. Hence, it is only people who can discourage cyber criminals by not availing of loans from their apps.”
- Report the app to RBI or other financial regulator
- Dial 1930 or visit cybercrime.gov.in
- Block any communication attempts from the app
- Consider changing your phone number, email id
- Seek assistance from financial counsellor or consumer protection organisation
(Inputs by Divya Cutinho/ Mangaluru, Tushar A Majukar/ Belagavi, Mallikarjun Hiremath/Hubballi, Prajna GR/ Madikeri, Firoz Rozindar/Vijayapura and Arpitha I/ Shivamogga)