The Supreme Court on Wednesday directed the Save Them India Foundation to approach the Ministry of Home Affairs or Ministry of Finance, in order to seek action against predatory lending apps. The petition, which highlighted the spate of suicides that have taken place in the last few months through these lending apps, said that since these apps were operated by Chinese actors it is a national security issue, LiveLaw reported.
While Google and investigative authorities have been rounding up operators of these illegal apps, and their Chinese owners, the Reserve Bank of India (RBI) issued a warning to customers about using predatory digital loan apps and also set up a working group to recommend regulations for digital lending platforms. The PIL filed by non-governmental-organisation Save Them India Foundation, sought the court’s intervention to take action against these fake lending apps.
The Chief Justice of India S.A Bobde told the petitioner to make a representation to the Home Ministry or Finance Ministry as this was a sensitive matter and not a judicial matter, the report said.
According to the report, the plea argues that China is attacking India through various mobile-based apps most of which became active the COVID-19 lockdown, targeting even key members of the legislature, executive and judicial branches of the Indian government. The petitioner said that these apps were stealing data from Indian citizens and selling them on the dark web and were operating without the RBI’s approval and were targeting high-risk users in order to provide unsecured small tenure loans with minimal documentation. The app operators also black-mailed, defamed and mentally harrassed borrowers in order to recover the loans, the petitioner added.
Lending apps: What you need to know
In the last few months, there have been several cases of suicides and complaints of harassment against several hundred 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
- Google has taken down over 200 of these apps since last week