Dealing with Fraudulent Loan Apps: How To Stay Safe?

Loans are to help ease people’s stress and ensure they are able to better manage their finances when they are in dire need of financial help. The pandemic brought along with it a lot of issues for families, including health and employment losses and the loss of near and dear ones. Many such unforeseen circumstances led to a substantial increase in borrowers all over the country. The last two years also saw a massive boost in digitisation, which helped a lot of industries and sectors evolve and transform their way of operation. FinTech was one such sector that grew exponentially during this time. The financial crunch along with the ease and flexibility of the FinTech sector and mobile apps, saw a lot of people turn towards mobile loan apps. 

However, fraudulent loan apps have wreaked havoc in people’s lives. From shaming to abuse, to harassment, these fraud apps have become a double – sword. In just literally six months, criminal cases related to fraudulent loan apps increased by more than 1,300 per cent to 900 in 2022, from 61 in 2021, according to data from the National Crime Reporting Portal. That is appalling and dismal! 

FinTechs are helping to create awareness about crime, and related harassment and educating borrowers so that they can avoid becoming victims of this menace. Every day thousands of fake loan apps are being tracked and shut down to protect people from becoming their victims. Fake loan apps exploit the simple needy person and extort money after lending it to them. The fake loan apps, according to consumers, charge as much as a 500 per cent interest rate which is significantly higher than the interest charged by RBI-approved institutions and use extortion methods to collect money from borrowers or loan defaulters.

There are many reports of borrowers’ personal information, including Aadhaar card, PAN card, contact list, etc. being shared with third-party platforms. While installing the fake app, the apps asks for some permissions, including access to his phonebook which the user isn’t completely aware of and gives permission. Once they provide that, this data can be used by anyone to issue anything such as a ghost loan. All of this is done without the complete knowledge of the borrower. In cases where the borrower defaults or even pays, they use the contacts to threaten to pay more. What is worse is that this data can be misused for iniquitous purposes as well.

Borrowers who failed to repay the loan within weeks on a higher interest rate were allegedly harassed by loan recovery agents and their family members were harassed to extort money.

The government and tech companies along with FinTech companies are enforcing stricter laws and rules to avoid such abuse. 

How can one identify and avoid falling for a fraudulent loan app?

There are some simple and yet effective ways to know whether or not it’s a trustworthy app. 

• The biggest red flag is not having a website. If an app does not have a website, stop right there
• Some of the websites also show a false affiliation with NBFCs. It would be prudent to check or verify the alliance.
• KYC is another way to identify false apps. If they do not follow any KYC norms or regulations, that is a sign of suspicion.
• No genuine bank or financial entity will ask for payments without the completion of the loan process.
• So, if anyone asks for payment before the loan app process, immediately walk away.
• Be mindful of what kind of permissions you give on your phone to any app. Be careful not to approve permissions for personal data like pictures, contact addresses and details.
• If the lender asks you too many irrelevant questions about your personal details instead of financial details, then know that there is something not right with the lender.

These are some ways to safeguard yourself from fraudulent lenders or apps and ensure you and your family members are safe.