Payday loan firm EarlySalary has acquired CashCare. CashCare sells loans to customers on websites like Infibeam and Shopclues, and accepts repayments in EMIs at annual interest rates ranging between fifteen and 25%, according to CashCare’s website. The service is offered to people who don’t have a credit card too. EarlySalary, which offers short-term payday loans, said in a statement that CashCare’s business model was a ‘natural fit’ into the former’s business. The acquisition gives the payday firm an entry into the world of consumer loans for retail.

Payday loan firms in India

While CashCare’s 15% annualized interest rate is not too different from what credit card companies charge, EarlySalary’s payday loans come at a steeper cost. Charging ₹9 for each day per ₹10,000 borrowed, their interest rate comes out to over 30%, compared to the 1.5–3% annualized interest credit cards charge, as we’ve pointed out before. On top of that, some of these firms charge a processing fee on top of the interest rate. Since they’re all essentially reselling loans by regulated non-banking financial companies (NBFCs) and are not exactly NBFCs themselves, they remained unregulated by the RBI until last October. In October, the central bank issued guidelines for these so-called peer-to-peer lending platforms.

In the US, payday loan companies thrived with questionable practices before regulation ever hit them in the form of multi-billion dollar penalties. CLK Management, for instance, made over $2 billion after misleading borrowers and charging many of them interest rates up to over 1000%. That firm faced a stiff penalty and its owner was jailed.

But the Indian scenario is nowhere near that damaging, or even misleading right now. Firms like EarlySalary and Rupeelend generally have much lower interest rates for short durations and discourage borrowers from extending their loans. Many of them use social media data from users — and even background apps running — to assess creditworthiness and to guess the purpose of the loan. Since the digital payday lending industry is less than half a decade old, and is already facing regulation enforcing transparency, it’s not clear whether it’ll go down the slippery slope seen in other countries.