Preying on the toxic mix of a pandemic and unemployment, Chinese-run fintech apps worked with impunity to provide quick loans at exorbitant interest and harassed defaulters leading to five deaths … reports Asian Lite Newsdesk
It took five deaths, a six-month manhunt involving crime branches of two states and 11 arrests across three states for police to finally nab four masterminds of the infamous loan apps scam.
Preying on the toxic mix of a pandemic and unemployment, these Chinese-run applications worked with impunity to provide quick loans at ridiculously high interest rates, at times as high as 37%, and then harass borrowers who defaulted using tools which violated financial and privacy laws.
Investigations have now revealed that over 24 illegal apps made 1.4 crore transactions worth over Rs 21,000 crore to fleece unsuspecting people across the country.
According to a list released by Citizen Collective, a platform that raises awareness on consumer rights issues, Google Play Store is host to 426 rogue lending apps. These applications involve abusive lending practices and ask users for several permissions, that put them and their contacts at risk.
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Most of the people caught in the debt trap had borrowed money from apps such as Bubble Loan, Liquid Cash, Cash Bee, Rupee Factory, Paisa Loan, SnapIt Loan, In Need, Rupee Plus, Pan Loan, Cash Port, Wow Paisa, Gold Bowl, Ok Cash, Udhaar Loan, Go Cash, FlashCash, Cash Pot, One Hope and Bily Cash. A Google search reveals that none of these rogue apps have websites or contact details.
Alarmed by the proliferation of these coercive apps, the Reserve Bank of India (RBI) had last week issued a warning. The central bank said, “There have been reports about individuals and small businesses falling prey to the growing number of unauthorised digital lending platforms and mobile apps on promises of getting loans in quick and hassle-free manner.” Members of the public, it said, are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company offering loans online or through mobile apps.
With the loan defaults surging due to high unemployment, consumers are forced to take unsecured credit lending. To make them aware of the dangers of taking these easy loans, the Reserve Bank of India (RBI) released an advisory asking consumers to not fall prey to the unauthorised digital lending platforms and also said that lending operations are only allowed for banks, NBFCs and other entities regulated by state governments under statutory provisions.
Modus operandi
A Chinese national identified as Zhu Wei who was arrested from the Delhi International Airport while trying to flee on New Year’s eve was the head of operations of loan apps being run by Aglow Technologies Pvt. Ltd., Liufang Technologies Pvt. Ltd., Nabloom Technologies Pvt. Ltd., and Pinprint Technologies Pvt. Ltd.
According to police, Zixia Zhang is the mastermind behind the entire operation. He and his Delhi-based accomplice started a company “Digipeergo Tech Pvt Ltd” in December last year. In the next few months, they launched another company by the name of “Skyline Innovations Technologies India Private Limited.”
With the help of a Singapore-based developer, the company developed 11 Instant loan applications that offer loans to individuals and collect huge repayments. These repayments included interest, processing charges, GST, default charges and once the loan period is over they charge 1 percent penalty and also resort to systematic abusing, harassing, threatening of the defaulters through call centers run by them. They even blackmail the borrowers by sending fake legal notices to their relatives and family members.
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These fintech apps advertise on social media, especially Facebook, luring people stating that the interest rate is only 0.98%. The interest rate sounds miniscule, but if these illegal digital loan apps charge 0.98% per day interest, it works out to an annual interest rate of 66%, which is almost double of the RBI-mandated upper limit of 36%. Moreover, in addition to the interest rate, the borrowers are always charged processing fees, and 18% GST.
These illegal fintech app-based loans gained prominence because the money was transferred almost instantly, unlike traditional banks which took weeks to release loans. When these apps are downloaded, they mandatorily require access to your contacts, video and photo gallery. Once the access is given, you have to share your PAN card and Aadhaar details. The salary slip is not one of the documents that these illegal fintech apps demand.
As soon as the documents are shared, unsuspecting customers are given Rs 3,000 and if the amount was paid within a week, the amount can go up to Rs 8,000 per week. The person can download several such apps to borrow a higher amount.
If the borrowed amount is Rs 4,000, you are required to pay back Rs 5,712, where the processing fee is Rs 1,425, GST on the processing fee is Rs 256 and the interest amount is Rs 31. If the payment is delayed by even a day, an overdue fee is charged. Unlike NBFCs or bank loans, where the processing fee is charged only the first time, here the processing fee is charged every week, for as long as the loan is active.