On the 12th of August, Bhupendra Vishwakarma and his family, who lived in Bhopal, a city located in central India, committed suicide after taking a family selfie. Vishwakarma, the father of two young boys and an employee at an insurance firm, was stuck in an unforgiving debt cycle which he owed to loan applications. Harassment from recovery agents, the last message even threatening to expose him on social media, was the final straw for him. He left behind a four-page suicide note explaining that his perceived loss of dignity became unbearable. One version of the note explained his fears around losing his employment, and how without a future in sight, he could not bear being a burden or facing his family. Five people associated with this scam have now been arrested.
Instances like Vishwakarma’s are rampant. A 23-year-old college receptionist, Shivani Rawat, had a similar experience. Having applied for a loan worth 4,000 Indian Rupees (approximately $48) in June 2023 on an app called “Kreditbe,” she began receiving calls for repayment just a week later – though she hadn’t received any loan amount. When Rawat attempted to explain the error, she was met with abuse from the recovery agents. They later escalated to distributing manipulated explicit images of her and her family to her colleagues, ultimately leading her to lose her job. Al Jazeera reached out to Kreditbe for clarity, but they could not be reached or located.
>Bhupendra Vishwakarma, along with his family, before he committed suicide [Anil Kumar Tiwary/Al Jazeera]
“Kreditbe,” ironically, has a name that seems reminiscent and derivative of a legal loan application, “KreditBee.” This is a common tactic employed by multiple illegal loan applications creating an illusion of authenticity. Vishwakarma and Rawat had resorted to taking out loans from such applications since they usually come with less paperwork and quicker loan dispersal times than traditional loans from banks. However, the catch comes with the hefty interest rates of 20% to 30%, with high processing fees often within the range of 15%. The recovery process begins as soon as 15 days after approval, although many report being harassed for repayment far sooner.
According to an independent cybersecurity expert based in Bhopal, Akshay Bajpai, there are currently over 700 loan applications active in India. Although some of these applications originate from India, most belong to Chinese-owned entities that employ Indians. Apps such as these range from being straight-up scams to operating in a murky scam-like manner, employing malicious tactics and not adhering to the rules of online lending that are decreed by the central bank. They are known to violate customer privacy, accessing customer details, contact lists, pictures, and even going as far as manipulating said images as blackmail for loan recovery.
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Frequently Asked Questions
Why are these illegal loan apps problematic?
Illegal loan apps are problematic due to both their operations and tactics. They not only break central bank rules on online lending, such as the annual interest rate stipulations and various charges, but they also access private customer data without consent. People end up entrapped in debt cycles and are left helpless due to the unlawful practices of these apps.
What types of tactics are used by illegal loan apps for loan recovery?
Illegal loan apps use various tactics for loan recovery, including incessant, harassing calls for repayment- often happening before the stipulated date. They are known to violate customer privacy by accessing, editing, and manipulating private images, threatening to disseminate them in an attempt to pressure their clients into loan repayment.
Does the Reserve Bank of India have any regulations in place for these apps?
Yes, the Reserve Bank of India has clear regulations that forbid lending institutions from storing customer information beyond minimal data such as name, contact details, and address. They also have guidelines on the maximum annual interest rate and associated charges. Unfortunately, many fraudulent loan applications do not comply with these rules.
Over the last two years, Al Jazeera’s survey discovered that an enormous number of Indians have fallen victim to loan application scams, with 58% dealing with extremely high interest rates of 25%, and over half suffering misuses of data or extortions during repayment.
## ‘Government Agencies are Unprepared’
Vishwakarma remarked in his suicide note that he sought help from the Cyber Crime Office in Bhopal, only to be turned down. A high-ranking Madhya Pradesh police official (name withheld) admitted to Al Jazeera that the police lack the requisite skills for handling cybercrime. Many cyber-police members, he said, don’t even have basic internet know-how, which is why most cyber crimes remain unresolved. ”
The scammers also employ interactive voice response systems which can be difficult to trace. Most operate using virtual numbers from neighboring countries like Bangladesh, Nepal, and Pakistan, making the culprits challenging to catch. The loan scams are usually carried out through applications with high searchability including words like “easy,” “loan,” and “Aadhar” – the Indian ID needed for banking and other services. They’re usually marketed on platforms such as Facebook and Google’s AdSense which lets website owners expand their user base through targeted ads. These apps modify their names and other details and reappear with new identities when faced with bans or complaints.
Even though loan app scamming takes place through bank accounts, very few scammers are caught. This, according to Rohit Jethwa, is due to limited digital literacy, with only 38% of Indian households being digitally literate as per the Oxfam 2022 India Inequality Report.
## Measures Taken
In March, the Directorate of Enforcement confiscated movable assets amounting to 1.06 billion rupees ($12.76 million) in Bengaluru linked to fraudulent activities by Chinese loan apps. The ED disclosed that the companies in question provided short-term loans to the public swiftly, charging high processing fees and high interests. The amounts were later recouped from the borrowers using aggressive tactics such as incessant phone calls and emotional manipulation.
Google India stated in a report that they removed over 3,500 personal loan apps from its Play Store in 2022 for violating its policies by illegally accessing user data, including contact lists and photos.
India’s Finance Minister, Nirmala Sitharaman, announced in September 2022 that the Reserve Bank of India (RBI) would compile a list of legal apps, and the Ministry of Electronics and Information Technology (MeitY) would ensure only these approved apps were made available on Google Play Store and Apple App Store.
However, the Finance Ministry had not sent such a list by February 2023, according to local media sources, contrary to a parliamentary report. During the same month, central bank governor, Shaktikanta Das, stated that digital lending apps are not regulated by the central bank, while the government banned 94 lending apps. These apps had been highlighted by the RBI for various reasons. Many of them had Chinese investments or had been implicated in harassing borrowers.
## Frequently Asked Questions
### What can be done to stop loan application scams?
The government and regulatory entities should ramp up their efforts to enhance digital literacy among the population. Furthermore, strict guidelines for loan applications and a comprehensive vetting process for such apps on the digital platforms can also curb these unethical activities.
### How can individuals protect themselves against loan app scams?
It’s crucial to check the legitimacy of any app before providing personal information. One can check the reviews, certifications, in addition to researching the company’s reputation before getting involved.
### What is being done to deal with cybercrime in India?
Although substantial steps have been taken, such as banning a number of loan apps and confiscating assets related to fraudulent activities, there are calls for more to be done. There is a need to improve the digital literacy of the population, regulated loan app operations, and improve the cybercrime handling skills of law enforcement agencies.
