A woman in Indore, who had borrowed Rs 20,000 from an app, was harassed because she missed a EMI for a day. “They started sharing my photos, calling me a fraud. They threatened me and said they would tell the police and send collection agents to my home. They harassed people on my contact list. ”
It is an attraction for many in times of distress. But the tap-and-get “solution” is pushing large numbers of people into a trap much deeper than the financial situation they are in. Harassed and humiliated by recovery agents hired by loan applications, many are dying by suicide while others are reaching out to law enforcement for help, even as agencies try to uncover loopholes and ways to curb this threat.
On Tuesday, Cyberabad and Hyderabad police arrested 19 people from Hyderabad and Gurgaon in the nationwide instant money loan application scam.
Unauthorized loan applications have become a great threat. Experts involved with the issue say that many of them operate outside the regulatory arena and are potential sources of money laundering. Increased digital awareness and faster detection of these malicious applications can help curb these criminals.
Suspecting the involvement of scammers from China in the fraud, Hyderabad police said they would soon involve ED and IT departments in an investigation into multi-currency money loan fraud involving at least 30 apps. “We have written to banks and they frozen 18 accounts, with more than 1.5 million rupees, ”said Cyberabad Police Commissioner Sajjanar.
So far, three people have committed suicide in Telangana this month. K Mounika, 24, an agricultural extension officer in Siddipet, had made use of a loan of Rs 3 lakh and after she failed to pay it on time, the app company rated her as delinquent and shared her photo, name and phone number on social media. . On December 16 he committed suicide. The same day in Hyderabad, P. Sunil, committed suicide in his flat.
Police said thousands of people across the country were attacked.
People looking for instant loans first download an aggregation app, which directs them to apps that process the loan application after collecting Aadhar, PAN details, and a selfie of the applicant. They also request access to the users’ photo gallery and the list of telephone contacts.
Although the loan is sanctioned immediately, the applicant has seven days to repay it. It is when the loan is not repaid that the problems begin. “We received several complaints, but no action can be taken because the person has approved the applications to access the contacts and gallery,” Indore cyber SP Jitendra Singh said.
Bank officials say that fintechs make loans to people who do not have sufficient funds. By using software to analyze bank statements, you can get an idea of the person’s ability to pay. Loan application companies are also violating the RBI’s rules on maximum interest rates.
There are application companies that charge 0.1% per day, which is equivalent to 36% per year, while there are others whose effective charge is equivalent to 10% per month. The RBI has capped the interest on microloans using a formula based on the banks’ average loan rate. At no time has the maximum interest rate allowed crossed 26%.
A closer look at their modus operandi reveals that these loan applications link to various non-bank financial companies (NBFCs) and use them as legal cover for their operations. As part of the alliance, the NBFCs give money to these loan applications, and in turn, they will find people in dire need and lend them money. Banking officials wonder if NBFCs are authorized to allow their recovery agents to work for loan applications. Authorities admit that this is a gray area that still needs to be monitored by the regulator.
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