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Google to ban digital lending apps from accessing user photos, contacts, location

The new policy prohibits digital lending apps from accessing sensitive data of users and could help prevent unethical recovery practices

Starting May 31, digital lending apps on the Play Store will not be allowed to access the contacts, photos, videos, call logs, external storage, and precise location of users, Google announced in a policy update last week.

“Apps that provide personal loans, or have the primary purpose of facilitating access to personal loans (i.e., lead generators or facilitators), are prohibited from accessing sensitive data, such as photos and contacts.” — Google

Why does this matter: Over the last couple of years, there has been a rise in complaints against predatory lending apps for resorting to unethical recovery practices including blackmailing the borrower with sensitive images obtained from their phone or harassing their family and friends by accessing their contact list. In some extreme cases, lenders have manipulated photos of borrowers to feature explicit content and used the same to blackmail the borrowers, telling them that the morphed photos will be shared with all their contacts unless they repay the loan. This has, in some cases, led to the borrower committing suicide. The policy update from Google could go a long way in curbing these predatory behaviors.

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Indian government’s fight against predatory lending apps: 

  • RBI’s digital lending guidelines: In September 2022, the Reserve Bank of India (RBI) released guidelines to regulate digital lending through online platforms and mobile apps. As part of these guidelines, lending apps are not allowed to access the media and contact list of users. Google’s policy, however, is more effective than RBI’s because Google can better enforce compliance through its app review process. The RBI guidelines also require apps to follow a code of conduct for recovery of debt, including requiring recovery agents to discharge their duties responsibly and following the fair recovery practices issued by RBI.
  • IT Ministry blocking apps: In February this year, the IT Ministry blocked 94 loan lending apps for displaying predatory behavior, among other reasons.
  • Whitelist of allowed digital lending apps: The Indian government has also sent a whitelist of approved digital lending apps to app stores (like Google Play Store and Apple App Store), but it is not clear when exactly the IT Ministry sent the list to app stores and whether the app stores have acted upon it.
  • Canceling licenses of erring NBFCs: RBI, in February, canceled the licenses issued to two Non-Banking Financial Companies (NBFCs)—Kudos Finance and Investments Private Limited and Credit Gate Private Limited—for their illegal digital lending operations. These two companies operated several digital lending apps. In May 2022, the RBI canceled the licenses of five NBFCs for similar reasons.
  • Home Ministry letter to states and UTs: Following a rise in the number of suicides linked to predatory lending, the Ministry of Home Affairs issued a letter in November 2022 directing all the states and union territories to take strict action against illegal lending apps.

Existing requirements for digital lending apps in India: In addition to the above requirement, digital lending apps in India have to comply with the following requirements as per Google’s existing policy:

  1. Submit the Personal Loan App Declaration for India, providing the necessary documentation to support the declaration.
  2. “If you are licensed by the Reserve Bank of India (RBI) to provide personal loans, you must submit a copy of your license.”
  3. “If you are not directly engaged in money lending activities and are only providing a platform to facilitate money lending by registered Non-Banking Financial Companies (NBFCs) or banks to users, you will need to accurately reflect this in the declaration.”
  4. The “names of all registered NBFCs and banks must be prominently disclosed in your app’s description.”

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