New Delhi: The ministry of home affairs (MHA) has asked all states and central agencies to take strict action against predatory lending apps, mostly Chinese-controlled, which use harassment, blackmail and other harsh practices of debt recovery, citing multiple incidents of suicides by borrowers in the country.
The Amit Shah-led ministry has shot off a letter in this regard to all state governments, Union territory administrators and federal agencies such as the Central Bureau of Investigation (CBI) and the National Investigation Agency (NIA).
According to the letter, dated September 28, a large number of complaints have been reported from across India related to illegal digital lending apps that provide short-term loans or micro-credits at exorbitant interest rates and processing or hidden charges, especially to vulnerable and low-income group people.
The lenders use confidential personal data like contacts, location, photos and videos to blackmail and harass borrowers, the letter said, seen by HT. “Harsh recovery practices followed by these illegal lending apps have claimed many lives across India,” it said. “This issue has caused a serious impact on national security, economy and citizen safety.”
The letter further added that these illegal lending apps that may not be Regulated Entities (RE) by the Reserve Bank of India are using bulk SMS, digital advertisement, chat messengers and mobile app stores on a massive scale. The borrower has to provide mandatory access to contacts, location, and phone storage in order to avail loans, it added.
{{/usCountry}}The letter further added that these illegal lending apps that may not be Regulated Entities (RE) by the Reserve Bank of India are using bulk SMS, digital advertisement, chat messengers and mobile app stores on a massive scale. The borrower has to provide mandatory access to contacts, location, and phone storage in order to avail loans, it added.
{{/usCountry}}“This data is misused to harass and blackmail the citizens using morphed images and other abusive practices by recovery agents located in India as well as overseas violating RBI’s Fair Practices Code,” it said.
Investigation has revealed this organised cybercrime is executed using disposable emails, virtual numbers, mule accounts, shell companies, payment aggregators, API services (account validation, document verification), cloud hosting, cryptocurrency, etc, the MHA said. Hence, it is advised to involve domain experts during an investigation.
The ministry also said law enforcement agencies can avail the services of the National Cyber Crime Forensic Laboratory (NCFL), one of the verticals of the Indian Cyber Crime Coordination Center (I4C) for technical assistance on loan app analysis, malware analysis and crypto transaction tracing.
“All states and UTs are requested to take strict legal action in this regard. Further, all states and UTs are also requested to spread mass awareness in all districts against the risks of using such apps,” the letter said.
A large number of Chinese-controlled loan apps have been found to be indulging in predatory lending in the recent past. The Enforcement Directorate has already investigated some apps in the last one year.
In addition to indulging in unethical operations, these apps utilise loopholes in the regulations and often operate in violation of existing rules and regulations, said an ED official, requesting anonymity.
“Such apps came up during the Covid-19 pandemic as many people across India faced financial hardship and needed funds and these apps lent money for periods ranging from a week to 30 days,” the official said. “These lending apps would charge high-interest rates and processing fees.”
Moreover, these apps are often found to be harassing users over the repayment of their dues, leading to reported incidents of dozens of suicides, said a second official, who also wish not to be named.
ED has recently frozen ₹9.82 crore of Chinese-controlled loan apps parked in merchant IDs with payment gateway companies.