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How will Google regulate predatory lending apps that are still harassing Indians?

Google’s Play Store policy for apps like Loan Home operating in India is set to change on September 15.

They called Shrikanth, threatening to start reaching out to people from his contact list. Pritam repaid part of his loan, but the amount due was never reduced on the app to reflect that. Nithin had repaid his loan a few days ago, but the app still showed that he had money due, on which hefty interest was accruing day by day. 

If we are to believe the reviews on the Play Store page of the Loan Home app, which has at least 1 lakh downloads, endless customers have shared their horror stories with the app in just August this year. Till now, apps like Loan Home have managed to slip through the cracks of Play Store policies. This month, however, Google’s Play Store is set to change its requirements for digital lending apps in India, only allowing lending apps that are either registered with the RBI or those that facilitate transactions with registered entities. 

App stores owned by Apple and Google have come under fire for charging commissions as high as 30% from apps on their platform. To justify these high commissions, the companies often point to their robust security and approval systems preventing harm to users. The fact that predatory lending apps are still targetting Indian users through the Play Store, however, exposes a significant loophole in that reasoning. 

Google to introduce new requirements for lending apps in India

Loan Home, which is developed by the developer KoinHappyBoykins, enjoys an average rating of 4 stars on the Play Store. When you click install, Google will even indicate that it’s ‘Verified by Play Protect,’ the feature that checks available apps for harmful behaviour. With predatory lending apps on the Play Store, often everything looks good on the surface. 

In order to tackle the specific problem with lending apps, Google is planning a more proactive approach. According to the new policy which is set to be implemented from September 15, lending apps will have to fill out the Personal Loan App Declaration for India. 

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  • RBI-licensed lending app: If an app has a license from RBI to offer lending services, they will have to fill in their License Number and attach the relevant proof of permission.
  • Only acting as facilitator: If an app is only facilitating lending between the user and an RBI-registered NBFC or bank, then they will have to declare that they comply with all applicable laws, including the RBI Fair Practices Code. No documents will be required from such apps.
  • Developer account name: Lending apps in India will be mandated to use their registered business name as their developer name on the Play Store and throughout the declaration form. 

If digital lending apps declare that they are only facilitators, whether Google will further verify that information is unclear. It is also unclear if Google will verify internally that the app is only facilitating lending through an NBFC or bank that has an RBI license. MediaNama has reached out to Google for comment and will update this report when we receive a response. 

The additional requirement of the declaration form has recently been instituted only for India. As indicated in the form, all personal loan apps operating in India without a proper declaration will be removed from the Play Store. 

What information do lending apps have​ to disclose on the Play Store?

Across the world, lending apps on the Play Store must disclose the following information as part of their metadata:

  • The minimum and maximum period for repayment of loans. (Apps that require full repayment within 60 days are disallowed.)
  • A maximum annual percentage rate (APR), which generally includes the interest rate plus fees and other costs for a year, or other similar rates calculated consistently with local law
  • An example of the total cost of the loan, including the principal and all fees
  • A privacy policy that discloses the access, collection, use, and sharing of personal data.

How bad is the problem of predatory lending apps in India?

  • 400+ rogue apps found: In December 2020, citizen initiatives Cashless Consumer and Banbreach released a list of 426 lending apps on the Play Store that had unreasonably high interest rates and used harassment tactics for repayments. 
  • 14 million transactions: When the Hyderabad police caught hold of a Chinese national operating four illegal instant loan apps in December 2020, they discovered that the apps had allegedly facilitated 14 million transactions worth nearly Rs. 21,000 crores in a period of six months. 
  • Arrests so far: Investigating the case of these rogue lending apps, the Hyderabad police arrested 17 people from Delhi, Gurgaon, and Hyderabad. 
  • Drove borrowers to suicide: In the state of Telangana alone, at least 6 suicides until January this year were attributed to harassment techniques used by digital lending apps. 
  • 1,509 complaints to RBI: In February this year, the Minister of State for Finance revealed in Parliament that RBI had received 1,509 complaints about digital lending apps, of which 1,019 were regarding unregistered apps.

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