“I used to think that if this does not end, the next step for me will be suicide,” Karan, a 26-year-old from Indore, told MediaNama. It all started when he installed an instant loan app in October 2020 after seeing an ad on Youtube. Facing financial difficulties, Karan took out a loan for Rs. 3000 with a repayment period of 7 days through the app.
Within 4 days, customer executives of the app started calling him, asking him to pay. Due to exploitative interest rates, his repayment amount was Rs. 6000, and in order to pay it, he decided to take out another loan from a different app, for which he would have to repay Rs. 9000.
I was trapped in the cycle for two months, and eventually, just to pay off my Rs. 3000 loan, I paid somewhere between Rs. 70,000 to 80,000 to different loan apps. I sold my bike, my family’s gold, I was in a very bad situation. — Karan
Karan recalls that the ad on Youtube painted a flowery image – an instant loan for Rs. 50,000 and a duration of 12 months, with a small interest amount. When he opened the app, however, the actual loan duration was 7 days, and the approved loan amount was just Rs. 3000. While Facebook and Google’s ad policies disallow such loan apps from advertising, many such ads have snuck under their radar amid the pandemic to target vulnerable Indians like Karan.
Digital ads are not regulated by the Indian government, and social media platforms have little incentive to turn down ad revenue. Predatory loan apps in India benefit from this status quo, trapping gullible Indians with misleading ads on popular social media platforms.
How bad is the predatory loan app problem in India?
Pugalyendhi Gautham is a busy man at SaveThem India, a foundation started in March 2020 to counter the lending apps problem in India. Currently, he works with 1,300 victims on a regular basis, roughly 30 of whom he has talked out of suicide*.
SaveThem India has, in 16 months of existence, received over 55,000 calls from victims of harassment from lending apps. Here are some of the common harassment techniques that loan apps use to recover money, documented by SaveThem India in screenshots and recordings accessed by MediaNama:
- Late-night calls: Lending apps use automated calling software to harass victims late at night and interfere with their daily life.
- Threats to inform contacts: In case the borrower defaults, lending app agents threaten to call the borrower’s contacts or create WhatsApp groups to announce their failure to pay. In some screenshots accessed by MediaNama, such groups were created and images were circulated with ‘420’ or ‘fraud’ written over the victims’ photos.
- Fake Legal Notices: The apps threaten to take legal action against borrowers and send fake legal notices with e-stamps indicating stamp duty paid under registered case to the government.
Predatory lending apps that harass victims are still readily available on the Play Store. Google is introducing new policies for India to filter such apps from the Play Store this month, MediaNama reported earlier. That, however, is only one piece of the puzzle. Lending apps are increasingly focusing less on the Play Store to get discovered, relying instead on alternative channels like SMS and social media advertising.
Loan apps use Google, Facebook ad platforms to run misleading or fake ads
To lure unsuspecting borrowers, predatory lending apps advertise on popular social media platforms like Youtube, Facebook, and Instagram. Ads for these apps have even appeared on apps like Truecaller and Zomato (through integrations with the Facebook Audience Network and Google Ads).
Loan apps advertising on social media often run misleading or downright fake ads. Here are some ways in which these ad banners carry misleading content –
- Media personalities; Some ads seen by MediaNama that ran on Youtube include pictures of well-known figures like Shah Rukh Khan, Akshay Kumar, Sudhir Choudhary, and even Prime Minister Narendra Modi.
- Bank Logos: Ads run on Facebook, Youtube, and Instagram seen by MediaNama use logos of trusted banks like Union Bank of India, IDBI Bank, ICICI Bank, and SBI. Logos of trusted payment apps like Google Pay, PayTM, and PhonePe were also used on ad banners to lure unsuspecting borrowers.
- Misleading Interest Rates: According to Gautham, misrepresenting interest rates is a standard trick loan apps use to trap borrowers. The ads will advertise misleading interest rates, and borrowers only find out the real interest rates once its too late.
How does Google allow such ads to target Indians?
As a consequence of Google and Facebook’s dominance in the digital marketing space, most ads, whether on Instagram, Youtube or Zomato, are governed by their ad policies. Both companies have specific policies to prevent such advertisements:
Google’s Ad Policy: Google’s ad policy has multiple clauses under which such ads should not be allowed, including specific policies for personal loan apps:
- Counterfeit Goods: According to Google ads policy, any ad that advertises a counterfeit good misusing a trademark or logo is not allowed on the platform.
- Misrepresentation: Google’s ad policy also states that the company does not allow ads that deceive users by providing misleading information.
- Minimum and Maximum repayment period: Personal loan apps need to state the minimum and maximum repayment period on the destination site for their ad.
- Annual Percentage Rate: The loan service needs to include the annual interest rate plus fees and other costs for a year on their landing page.
- Total Cost of Loan: According to Google’s ad policy, loan apps also need to provide an example illustrating the total cost of the loan, including all applicable fees
- Short-term Loans: Loans that demand repayment in less than 60 days are not allowed to advertise via Google ads
While the ad policies are comprehensive, most of the ads accessed by MediaNama that ran on Youtube and the Play Store violated at least one, if not multiple, of these policies.
In a statement responding to questions sent by MediaNama, a Google spokesperson pointed to the newly implemented advertiser identity verification programme, under which advertisers on Google will be required to submit their legal name and proof of identity:
In 2020, our investments in policies and enforcement blocked or removed approximately 3.1 billion ads for violating our policies and restricted an additional 6.4 billion ads. — Google spokesperson
What are Facebook’s policies around harmful ads for Predatory Lending Apps?
Facebook’s Ad Policy: Facebook has clarified under its ad policies that the review process relies on automated tools to check for a violation. Here are Facebook’s ad policies relevant for loan app advertisements:
- Payday Loans: Short-term loans (under 90 days) intended to cover expenses until payday are not allowed on Facebook’s ad network.
- Misleading claims: Ads must not contain deceptive or misleading claims about the effectiveness or characteristics of a product or service
- Unacceptable business practices: Ads must not promote products meant to scam people out of money or personal information.
Personal loan apps running on Facebook and Instagram, seen by MediaNama, have used logos of IDBI Bank and Union Bank of India, clearly violating the ‘misleading claims’ clause of the policy. Multiple ads also advertise loan apps that have a repayment period of under 90 days.
In a response to questions sent by MediaNama, a Facebook spokesperson said:
Reviewing ads from millions of advertisers globally against our Advertising Policies is essential, but it is not without challenges. Our enforcement isn’t perfect, and both machines and people make mistakes. We also have reporting so that people can let us know if they believe an ad violates our policies. — Facebook Spokesperson
What have Google and Facebook done so far about harmful advertising?
- Advertiser Identity Programme: In 2020, Google launched the advertiser identity program, requiring advertisers to verify their legal name through authorised documents, a Google spokesperson told us over e-mail.
- Fewer alcohol and gambling ads: In December 2020, Google introduced an option in Ad Settings through which users could limit their exposure to gambling and alcohol ads.
- Agreement with advertisers on online harms: Facebook, YouTube, and Twitter reached a deal with their largest advertisers on harmful content online in September 2020. The companies agreed to adopt a common framework for defining harmful content that is inappropriate for advertising.
- No targeting for credit card ads in the US: After backlash from civil rights groups, Facebook decided to remove ad targeting via age, gender, and zip code for housing, employment, and credit card ads in the US.
*Disclaimer: If you or someone you know is experiencing thoughts of suicide, please call one of the helpline numbers listed here or contact a mental health professional.
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- The Fake Loan App Scandal Is Not Going Away Anytime Soon
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