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Loan apps are scamming Indians by hiding the ugly details in terms and conditions, misusing data

Manas Tiwari     December 24, 2020

Mr X lost his job in May in the aftermath of COVID-19. He had few expenses to take care of children's school fee, car EMI, house EMI, medical needs of parents. For few weeks, he survived on savings. Then, he got to know about a money lending app that gives instant loan and reasonable time to return that. Going through a difficult phase in life, Mr X took a loan of Rs 30,000, hoping to find a new job and return the sum.

Instead, he got just Rs 27,000 in his bank account. Puzzled, Mr X called the customer care, only to find out that 10 per cent is deducted as TDS beforehand. Mr X has no option but to settle. Two months later, he repaid the amount. Yet, the customer care executives called him to inform that the app charges a hefty 30 per cent interest rate and he needs to pay Rs 9000 more. This is significantly higher than interest charged by RBI-approved institutions.

A furious Mr X refused to pay that sum. In response, the customer care executive started abusing him and threatened to call his friends and family as well. How did he have access to their details? Well, while installing the app, Mr X gave some permissions, including the access to his phonebook. The executive also threatened to send a notice to Mr X's house.

This is how the multi-crore money lending scam in India works. There are several such platforms that have come up promising good returns, before revealing the bad conditions applied and then turning ugly with abuses and threats.

The Bust

This money lending scam came back to light when the Hyderabad Police froze 75 bank accounts holding Rs 423 crore in connection to a scam where apps were charging 35 per cent interest to victims. The scam was conducted via 30 mobile apps, none of which were approved by the Reserve Bank of India (RBI). The business operated through firms registered at Bengaluru in January and February this year, as well as call centres in Gurgaon and Hyderabad.

The calls were made from centres set up in Gurgaon, Bengaluru and Hyderabad that employed over 1,000 people were employed, many of whom were college graduates paid between Rs 10,000 and Rs 15,000 per month.

The scam involved loan apps like Hey Fish, Monkey cash, Cash Elephant, Loan Zone, Cash Zone, Water Elephant, Mera Loan etc. Apart from this, instant personal loan apps involved were Cash Mama, Loan zone and Dhana Dhan. The two companies named are Onion Credit Private Limited and Cred Fox Technologies which were offering instant loans by charging a hefty interest.

The Real Scam

From the outside, it seems like charging the extra interest is the fraud. That isn't the case. Renowned cyber security expert and researcher, Amit Dubey points out that lot of other things are also happening the backdrop of money lending.

"Despite of RBI guidelines, these scams are being pulled off. This is very serious. When these apps lure you to take loan, they also ask for your Aadhaar card, PAN card and access to your phone book. Once you provide that, this data can be used by anyone to issue anything. When you default or even pay, they use your contacts to threaten you," Dubey told India Today Tech.

He said that there have been cases where company executives called family members and relatives of the victim and abused them as well. They can also seek camera access and record things, Dubey said while highlighting that criminal minds do not have any limits.

"See, people have been hit. They have lost jobs, there have been salary cuts and people need money. These apps are taking advantage of this situation by offering different deals. They will give you a longer return period," he pointed out.

Interestingly, some of these apps have the same owner and they try to engulf you in a vicious cycle. If you have taken loan from one and are unable to pay, the other will call you and lure you to take loan from them to repay the first lender. This is how users find themselves in a never-ending cycle.

How to Stay Safe?

First of all, you should not trust any app or platform that is not approved by RBI, Dubey said. There are several such platforms but cannot be trusted. Secondly, when threatened, the borrowers should not panic and reach out to the concerned authorities.

"The information you provide allows these apps to know what you are doing, what your location is etc. This allows them to threaten you. They will tell false things to your relatives. They specifically hire people who can talk trash. Most people panic and pay money," cybersecurity expert Sanyog Shelar pointed out.

He suggests users to not give permissions to any of these apps.

"If you are installing the app and it asks for permissions, don't grant that. If they refuse to sanction the loan, that is the first sign that there is something wrong with the app. You should immediately uninstall it. If you somehow end up in this situation anyway, you should reach out to the nearby police station and register a FIR," he added.

The RBI has also cautioned individuals and small businesses against falling prey to unauthorised digital lending platforms and mobile apps that promised hassle-free loans.

"These platforms charge excessive rates of interest and additional hidden charges, adopt unacceptable and high-handed recovery methods and misuse agreements to access data on mobile phones of borrowers," the central bank said.


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