Fake Loan Apps Thrive As Authorities Fail To Crackdown, Leaving Consumers Vulnerable

Fake loan app | Representative image | Photo courtesy: Special arrangement 

Vishal Diwan, an IT professional from Gurgaon, fell prey to the devious tactics of illicit loan app companies, plunging him into a nightmarish ordeal that would leave him shattered. In desperate need of 12,000 rupees, Vishal turned to multiple loan apps, hoping for a quick solution. Almost immediately, he received responses from various apps, resulting in a total of 24,000 rupees deposited into his account from multiple sources. 

However, what initially seemed like a lifeline quickly transformed into a debt trap when Vishal discovered the exorbitant interest rate of 18 per cent per annum for a mere seven-day loan. His struggle with the loan repayment would soon be eclipsed by a wave of threats, blackmail, and harassment that would disrupt his personal and professional life, forcing him to navigate the treacherous path of seeking justice in a system ill-prepared to combat cybercrime.

“I thought I had finally escaped the clutches of the loan app nightmare when I managed to repay the borrowed amount by October 2021. However, my relief was short-lived as the nightmare resurfaced in December. Relentless calls bombarded me, demanding additional payments that I never owed. What followed was horrifying as the loan app operators stooped to despicable tactics, resorting to threats and blackmail against me. These criminals morphed my pictures and shamelessly circulated my nude images to my friends and relatives from my contact list. The invasion of my privacy and the humiliation I felt were beyond words. It didn’t stop there; the repercussions spilt over into my professional life, as the perpetrators misbehaved with my colleagues at my workplace, leading to the loss of my job,” recounts Vishal.

Vishal names apps like Asan Loan, AG Loan, Rupee Ready and Tyto Cash as the ones that defrauded him. In his desperate search for justice, Vishal faced numerous hurdles. Approaching the Cyber Crime Police Station was met with challenges, as he discovered the inadequacy of the authorities to combat cybercrime. According to Vishal, the police lacked the necessary resources and technology and grappled with solving these cases as these criminals most often operated from international phone numbers. Compounding the issue was the delay in registering Vishal’s case, which took six to seven months, adding to his trauma. In Vishal’s case, the Gurugram police registered a case several months later under Sections 66, 66b, 67, 67a of the Information Technology (Amendment) Act of 2008 and Sections 384, 420 and 465 of the IPC. Despite some progress with the arrests of a few individuals, Vishal contends that the main perpetrators behind these fraudulent loan apps operate with impunity, showing no fear of law enforcement agencies.

Vishal Diwan being harassed by a loan app company | Photo courtesy: Vishal Diwan

The Gurugram police revealed to us that these criminals use illegal call centres and operate from international numbers. These call centres serve as hubs for hacking into the phones of unsuspecting loan app users, enabling the theft of sensitive information such as bank details, emails, and photographs. Armed with this data, the criminals embark on a campaign of harassment, going so far as to distribute morphed pictures of the victims to their friends, colleagues, and relatives. 

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Despite the distressing ordeal endured by Vishal, it has come to light that some of the loan apps responsible for his victimisation continue to operate freely, evading accountability, and can still be found available for download on the Google Play Store. The fact that these rogue loan apps can still maintain a presence on reputable platforms raises serious concerns about the effectiveness of the vetting processes in place to protect unsuspecting users.

As our investigation deepened, we encountered yet another victim. Tincy Joseph, who availed herself of a loan from one such app towards the end of 2020, shared her harrowing experience. Tincy's narrative sheds light on the exorbitant charges imposed by these loan companies, in clear violation of the Reserve Bank of India (RBI) guidelines, leaving borrowers trapped in a cycle of debt. Tincy also lost her job and to this date is being harassed by the loan app companies from whom she borrowed money. 

According to Tincy, the loan app she chose levied an exorbitant processing fee, far exceeding reasonable limits. To make matters worse, the interest rates charged were substantially higher than those mandated by the RBI. What began as a modest loan of approximately 13,000 rupees quickly spiralled into an overwhelming burden, and Tincy was asked to pay an interest of 20,000 rupees towards a loan for 7 to 15 days. 

Tincy Joseph being harassed by a loan app company | Photo courtesy: Tincy Joseph

“During a brief period, I encountered a financial crisis, and as a result, I defaulted on a loan payment. It was an incredibly challenging time, compounded by the ongoing pandemic. To my utter shock, I discovered that the loan app I had borrowed from had illegally hacked into my smartphone, gaining unauthorised access to my entire contact list. Exploiting this breach of privacy, they started sending distressing messages to my relatives and friends. Desperate to resolve the situation, I approached the loan app, humbly requesting a short grace period to overcome the unexpected financial setback. However, they did not agree. These unscrupulous apps have even resorted to harassing my relatives, demanding repayment on my behalf. Our lives have been thrown into turmoil as we are being relentlessly tormented and blackmailed for money,” narrates Tincy.

Police’s Inability To Take Action 

Bubai Khan, another victim of the exploitative practices employed by loan apps, shares a distressing account. Having borrowed a loan from one such app for seven days, he alleges that the ordeal began even before the repayment deadline was due. On the sixth day itself, he found himself inundated with calls from the loan company demanding immediate repayment.

In a chilling parallel to Tincy’s ordeal, he asserts that his personal privacy was violated when the loan app hacked into his contact list, subsequently subjecting him to a barrage of harassing phone calls. Just like what happened in Vishal’s case, Bubai reveals that his tormentors resorted to an appalling act of morphing his photograph, subsequently distributing it among his friends and relatives.

Police’s action taken mail stating that it was not possible to trace people who victimised Bubai Khan. | Photo courtesy: Special arrangement

“I availed loans from apps like Small Loan, Cash Advance, and Cashbus. The level of harassment I endured reached such alarming proportions that, at one point, I contemplated committing suicide. The tormentors didn’t stop at targeting me alone; they went so far as to call my wife and subject her to abusive behaviour,” laments Bubai.

Bubai’s encounter with the authorities yielded disheartening results, as he discovered the limitations they faced in their investigation. According to him, the police struggled to trace numerous phone numbers related to the case, and their response in the action taken report indicated the complexity of the situation. 

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In their official correspondence, the cyber police acknowledged Bubai’s association with the loan platforms Small Loan and Cash Advance, highlighting his failure to repay the borrowed amount within the stipulated timeframe, because of which Bubai became the recipient of multiple phone calls from these platforms. The language used by the cyber police is a testament to the seriousness with which they were handling the case.

The police mail on the action taken status states: “It has been known that the petitioner took a loan from the two platforms, namely “Small Loan” and “Cash Advance”, but as he failed to repay the loan in time, he got several phone calls from those two loan platforms. During the enquiry, it was also learnt that in the case of “Cashbus”, communication was made with him through WhatsApp call, which is an international number and which is not possible to trace out from our end.”

Another victim, Mohammed Javed, sharing his harrowing experience, recounts the dire financial crisis he faced during the lockdown. Desperate for assistance, he says he turned to Elephant Loan, another loan app, only to be ensnared in a web of deceit. Despite agreeing to a loan period of 45 days, he received a distressing call on the fifth day, demanding repayment within a week. Javed alleges that threats followed as the company unleashed a campaign of harassment upon his contacts.

Javed, who had also taken loans from a few other companies, claims that one of these companies had created a WhatsApp group, sharing Javed’s photo and branding him a fraud. He says the most brutal of the tactics involve these companies resorting to morphing images and circulating borrowers’ nude pictures as a means of intimidation. Javed reveals the twisted logic employed by these predators, who perceive borrowers who repay as soft targets, assuming their fear will enable further exploitation. Javed shares that the loan app ordeal pushed him to the brink of despair. He openly admits that the weight of the harassment became so overwhelming that he contemplated taking his own life on multiple occasions. “I wanted to commit suicide, but in my darkest moments, it was the unwavering support and love from my family that kept me going,” says Javed.

Javed explains that his story is not an isolated one. He highlights the distressing reality that many individuals, unable to endure the harassment inflicted by these fake loan app companies, have ended their lives in desperation. The psychological toll inflicted by these predatory practices, coupled with the fear of public humiliation and the incessant threats, can shatter even the strongest among us, he notes. 

A screenshot of two messages sent by a loan app firm to Prajyot Bolake | Photo courtesy: Prajyot Bolake

Another victim, Prajyot Bolake, endured the same harassment for two long years before deciding to change his mobile number and resorting to personally contacting each person on his contact list to explain the nightmarish situation. 

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A Debt Trap To Lure Unsuspecting Consumers

According to Nikkhhil Jethwa, activist and founder of Loan Consumers Association, "These loan apps are nothing short of a debt trap. They lure unsuspecting consumers by promising instant loans without the need for documentation. They then manipulate the consumers into recording videos where they confess to taking the loan, using their Aadhaar and PAN cards as leverage. These apps also illegally gain access to personal galleries and contact lists and then unleash a massive online scam."

Jethwa further explains, "These apps violate RBI guidelines by offering seven-day loans. Additionally, they deduct a significant portion, often 20% or more, from the approved loan amount before disbursing the remaining funds. The trouble begins as early as the sixth day, with non-stop harassment and threats from the loan app operators". Highlighting the gravity of the situation, Jethwa emphasises the urgent need for regulatory intervention. He urges authorities to take stringent action against these exploitative loan apps, protect consumer rights, and enforce compliance with established guidelines.

Nikkhhil offers a few solutions for victims of these fraudulent loan apps. "If you find yourself trapped, the first step is to utilise social media platforms and tag the relevant authorities. Additionally, you can raise your complaints by writing to sachet.rbi.org.in, which has dedicated cells to handle such cases. It is crucial to report the criminal offence of contact calling to the local police by filing a formal complaint."

No Regulations, No Guidelines

Advocate Deepak Vijay More, a law officer with the Mumbai police, highlights the absence of guidelines and regulatory measures for loan apps. "Currently, there are no specific guidelines in place to regulate these loan apps, and there is a lack of dedicated forums or agencies to address consumer grievances," asserts More. He further points out that the Reserve Bank of India (RBI) recently released a list of fake loan apps, indicating the prevalence of fraudulent practices in the digital money lending sector.

More emphasises that these loan apps continue to operate with impunity due to the lack of focused enforcement by any regulatory agency. Despite receiving numerous complaints against online lending apps, the action taken by the RBI remains a question. While some of these illegal loan apps may have been removed from the Google Play Store, many others persist and can still be easily downloaded by unsuspecting individuals. The need for comprehensive measures to crack down on these apps and safeguard consumers remains pressing.

Given the vast number of loan apps available in the digital space, the resources of the Reserve Bank of India (RBI) may be significantly stretched when it comes to effectively monitoring and regulating each app. The sheer volume of apps catering to online lending activities makes it challenging for the RBI to keep track of its operations and ensure compliance with established guidelines. Monitoring these apps requires dedicated personnel, sophisticated technological infrastructure, and regular scrutiny of the ever-evolving digital landscape. 

Google recently outlined certain guidelines for app promoters, emphasising the necessity for platforms to furnish proof of possessing the appropriate lending licences. However, the realm of digital lending presents an intricate challenge. The RBI acknowledges that certain apps, barred by platforms like Google, employ clever tactics to evade restrictions by migrating to alternative platforms or resorting to text messaging for promotional endeavours. Another challenge being a significant number of lending platforms are operated by offshore entities that operate beyond the jurisdiction of Indian legal frameworks.

Inspector Reeta Yadav, in charge of the Noida Cyber Crime police station, advises caution when downloading loan apps, underlining the importance of scrutinising the access permissions requested by such applications. She asserts, "If you are considering installing a loan app, it is crucial to carefully evaluate the permissions it seeks. Why would a loan app require access to your gallery or contacts list? This alone raises red flags and indicates the likelihood of it being fraudulent. It is essential to exercise caution and refrain from proceeding further."

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Inspector Yadav further emphasises the need to verify the licensing and adherence to RBI guidelines of the downloaded apps. She advises, "Before proceeding with any loan app, it is imperative to conduct thorough research to ensure its legitimacy. Verify if the app is licensed to operate and if it complies with the guidelines set by the Reserve Bank of India. By taking these precautions, you can protect yourself from falling victim to fraudulent schemes."

The prevalence of fraudulent loan apps and the detrimental consequences they inflict on individuals cannot be overlooked. Despite the distressing accounts of victims, it is disheartening to observe the lack of concerted efforts to address this grave issue as a serious crime. Countless innocent lives continue to be marred by the vicious cycle of harassment, threats, and financial ruin perpetuated by these fake entities. The stories of Vishal, Tincy, Bubai, Javed, and numerous others serve as a poignant reminder that the impact of these scams extends far beyond financial loss. Lives are shattered, families are torn apart, and individuals are pushed to the brink of despair. It is high time that authorities, regulatory bodies, and law enforcement agencies recognise the severity of this issue and take decisive actions to protect the vulnerable.