In October 2021, 26-year-old Jafar Khan urgently needed money to pay hospital bills for the delivery of his wife Shafi. A resident of Pune, a tech hub about 150 kilometers from the financial capital Mumbai, Khan had heard about a mobile app called Rich Cash from a friend.
“I just shared my bank details [on the app] and asked for a loan of 5,000 rupees (about $65),â Khan said.
But when Khan went to repay the loan a week later, he couldn’t find the app on his phone or anywhere on the Google Play store. Khan said the app had been missing for months.
Then, in February 2022, a man claiming to be a Rich Cash agent called Khan, asking for 10,000 rupees â double the original loan â citing rising interest rates. The agent threatened Khan that if he didn’t pay, there would be consequences. Khan didn’t have the money and told the person on the phone. The next morning, a friend called Khan to inform him that he had received intimate photos of him. Rich Cash’s agent had somehow accessed Khan’s phone book and sent his personal photos to contacts on Khan’s WhatsApp account whose names began with A. A panicked Khan quickly arranged 7,350 rupees and paid the agent. âI also shared a screenshot of the money sent with him, and he assured that this matter was closed,â he said.
But a month later, another person claiming to be a Rich Cash agent called Khan demanded another 10,000 rupees, also threatening serious consequences. Khan said that when he tried to explain the situation, the agent “started calling my contacts, insulting them and sending them lewd pictures of me. He told me he had no not afraid of the police. It was then that Khan, who works in a software company, went to the cyber police station in Pune, where he spoke with Rest of the world in March.
Sonali Manjare, 35, also filed a similar complaint at the police station. In March, Manjare borrowed 5,000 rupees (about $65) from a quick loan app, called Sharp Loan, to spend during her grandmother’s last rites. She repaid the amount within a few days, using the PhonePe payment app. Yet a few days later an agent called her insisting that the company had not received her payment. The agent threatened that if she did not make the payment, he would inform all his contacts of his inability to repay. Manjare, who works as a clerk in a private company, ended up paying double.
Khan and Manjare’s grievances are two of more than 700 complaints of harassment by debt collectors from digital loan applications lodged at the Pune cyber police station in the first three months of 2022, the agency said. Senior Police Inspector Dagdu Hake. The station had received around 900 such complaints in 2021 and just over 700 similar complaints in 2020.
Digital loans more than doubled in India from 2017 to 2020, according to a November 2021 Report by the Reserve Bank of India. The report was published by a RBI Working Group on âdigital lending, including lending via online platforms and mobile applicationsâ, which was formed in January 2021 to protect consumers, following concerns about the operation of digital lending applications.
A majority of Indians do not qualify for loans from banks, partly due to a lack of collateral and a poor understanding of the loan process. Of the 220 million Indians eligible for loans from legal financial institutions, only 33% have access to a bank account. âIt takes time to get the loan approved by the banks. Many do not have a bank account or the accounts are not active,â said Manik Kadam, a social activist from Maharashtra. Rest of the world. âIlliterate people find it difficult to go through the process of applying for loans from banks. Thus, people in need find it easier to approach private and other lenders.
Over the past seven years, a slew of legal mobile lending apps, such as Dhani, Navigation, PayMe Indiaand IndiaReady emerged to meet their needs. âThere are 200 to 500 mobile lending apps or startups, and half of them would have gotten funding. Each app company is the size of a few lakh rupees to 100-150 million rupees,â said Srikanth, the organizer of CashlessConsumer, a consumer awareness collective. These apps offer loans ranging from Rs 500 to a few lakh.
But the rise of the legal mobile loan industry has also encouraged the emergence of fraudulent apps, such as Rich Cash, Cash Fish, Best Paisa, Speed ââLoan and Happy Wallet. Between January and February 2021, almost half of 1,100 digital loan apps available in India were illegal, according to the RBI task force report. Sachet, a portal for filing complaints with the RBI, received 2,562 complaints about loan apps promoted by unregulated entities between January 2020 and March 2021. Google Play Store had removed more than 205 such apps by November 2021.
Several fake loan apps are run by fictitious companies owned by Chinese entities, according to CashlessConsumer, which studied more than 1,000 mobile loan apps between December 2020 and January 2021. These apps disappear from online stores every few months, then reappear under different names, CashlessConsumer’s Srikanth said Rest of the world. âPreviously, they ran customer call centers for grievance redress. Now they provide WhatsApp numbers to customers so the police cannot track calls or conversations,â he said. âPolice also fail to trace apps or companies running DLAs. [digital lending apps] as they disappear.
Formal cases are rarely registered because victims have little hope of recouping their losses, said Rohin Garg, associate policy adviser at the Internet Freedom Foundation (IFF). âEither the victims do not go to the police, or they do not file a complaint, because they are aware that this exercise will be futile. The central government has promoted digital payment and as a result the number of such loan applications will increase and so will the cases of fraud,â Garg said. In the absence of a formal complaint, these apps are not reported to the RBI and no action can be taken against them, Police Inspector Hake said.
The RBI task force has proposed setting up a self-regulatory body to cover all stakeholders in the digital lending ecosystem. He also proposed legislation to prevent illegality in digital lending apps. “RBI needs to proactively put in place a regulator to bring these lending apps under regulation,” said IFF’s Garg.
Without regulation, people like Khan will continue to be targeted. Although Khan has not been approached by Rich Cash officers since filing a complaint with Pune Cyber ââPolice, he said, “I will contact banks for loans in the future, and I I will never go for mobile lending apps”.