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MEITY says Chinese lending app fiasco is a state subject

The Ministry of Electronics and Information Technology (MEITY) says that it is the responsibility of state governments to investigate cases of malpractices by predatory digital lending apps. Despite receiving complaints concerning fraud and harassment by these app operators, the MEITY did not provide information on the government’s stance on the Chinese-backed lending app fiasco, in response to Parliamentary questions.

IT Minister for State Sanjay Dhotre said that as of January 20, 2021, Google had removed 100 digital lending apps on its app store after law enforcement agencies took up the matter with the tech-giant. “The complaints are mainly related to high interest rates, alleged collection of personal data and its misuse, fraudulent and unlawful practices of physical threats and use of other coercive methods for recovery of loan. Few cases have also been filed in the courts,” he said.

The questions filed by Bharatiya Janata Party Member of Parliament Kanak Mal Katara sought the government’s position on the spate of predatory lending apps on Google’s Android Play Store.

While the ministry met with Google for prevention, detection and removal of these fraudulent apps from their Play Store, Dhotre said that state governments are responsible for prevention, detection, investigation and prosecution of crimes including misuse of social media through their law enforcement machinery since ‘police’ and ‘public order’ are State subjects as per the Constitution. He further added that National Cyber Crime Reporting Portal operated by the Ministry of Home Affairs records all cyber complaints and incidents, which law enforcement agencies in respective states have access to.

Dhotre did not provide any information on what the Government’s position is on the issue, instead he cited a Reserve Bank of India (RBI) press release, which warned customers about these illegal digital lending apps.  “NBFCs registered with RBI and other entities who are regulated by the State Governments under appropriate statutory provisions such as Money Lending Acts. Members of public were cautioned not to fall prey to such unscrupulous activities and were requested to verify the antecedents of the company/ firm offering loans online or through mobile apps,” he said.

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The RBI also set up a working group to recommend regulations for digital lending platforms. Over the past two months, Google and investigative authorities have been rounding up operators of these illegal apps, and their Chinese owners, after several cases of suicide and harassment were reported against many digital lending apps, most of which are unregulated, fly-by-the-night operations.

While the RBI has strict guidelines on interest rates that can be charge and practices to be followed by collection agents when attempting to recover or collect loan repayments, these apps use predatory tactics to earn high margins and recover the loan. Many borrowers complaint that employees of these apps and companies harassed them over the phone or through blackmail, and even turned social media to embarrass them.

  • Hundreds of new digital lending apps emerged post COVID-19
  • These apps offer short-term loans at exorbitant interest rates, loans for as low as Rs 3,000 at interest rates of 50-100% per annum
  • App operators harass borrowers whenever there is a delay in repayment
  • Lending apps on the Google Play Store cannot offer such short-term loans for less than 60 days as per Google’s policies
  • Regulated lenders need to offer borrowers a minimum of 30 days for loan repayment, therefore loan tenure cannot be less than 30 days
  • Regulated lenders are mandated to encrypt data or mask sensitive personal information for KYC purposes
  • Fake digital lending apps use app permissions to gain unlawful access to sensitive customer information

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