The Governor of the Bank of England (BoE) Andrew Bailey wants Google and other tech giants to be accountable to monitor and take down online financial scams, the Sunday Times reported. The move comes at a time when Indian regulators are also taking notice of online financial frauds and how to best combat the issue by making tech giants accountable to monitor the same.
The Governor has been lobbying Home Secretary Priti Patel to introduce the measure under proposed Online Harms Bill, a Reuters report said of the Times story. It added that the development in the United Kingdom comes at a time where over £78 million was stolen from unsuspecting customers through fake investment websites last year, the report said. Since the proposed Bill forces tech giants to address online child grooming and terrorism related crimes, Bailey wants proposed legislation to be expanded to cover financial frauds as well.
Throughout the course of 2020, there has been a mushrooming of digital lending apps in India some of which are unregulated entities and others’ which use a licensed lender as a cover to provide pay-day loans. These apps are predatory fly-by-the-night operations that charge exorbitant fees and interest rates, and resort to extortion and blackmail tactics to collect payments from borrowers. As a result, a number of borrowers have committed suicide in the last few months.
In 2020, the Reserve Bank of India (RBI) received 1,509 complaints related to digital lending mobile applications in 2020, of which around 1,019 were against unregulated and unregistered digital loan apps. In response to the growing menace of fake lending apps and suicides among borrowers, in January the RBI set up an internal working group to recommend regulations for digital lending platforms and mobile applications. It will submit its report in three months time.
Third-party loan marketplaces and apps which work with regulated non-bank lenders and banks have to follow strict guidelines on fees, interest rates, collection practices and risk management. Many of the predatory lending apps that have emerged in the last year either work with small non-bank lenders, which are licensed by the RBI, or they work outside any rules or regulatory framework.
The RBI expects regulated lenders to ensure that their partners, the third-party players, follow similar rules and regulations that they are mandated to follow. But since the central banks’ supervisory function is limited, many regulated entities go under the radar and are able to engage in illegal, or at the least questionable, activities.
The regulator and state police departments have been pushing Google to cleanse its app store of these predatory lending apps as well.
All you need to know
- Hundreds of new digital lending apps have emerged post COVID-19
- These apps offer short-term loans anywhere from six days to one month at exorbitant interest rates
- They provide loans for as low as Rs 3,000 at interest rates of 50-100% per annum
- 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 Know-Your-Customer purposes
- App operators harass, intimidate and extort borrowers whenever there is a delay in repayment or even if the borrower has repaid the principal and interest
- The list app permissions that predatory lending apps seek from borrower, effectively gives their operators unlawful access to sensitive customer information
- Google has taken down over 400 of these apps from its Play Store over the past three months