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Rs. 21,000 crore lending apps scam busted & how5 min read

January 8, 2021 4 min read

Rs. 21,000 crore lending apps scam busted & how5 min read

Reading Time: 4 minutes

Many times we come across pop-ups on our smartphones showing advertisements regarding instant loans of small denominations, which does not require any paperwork and guarantee of crediting the funds within hours.

The advertisements are made to lure people into getting these loans, which often showcases the ease of getting the loan and paying it back. Especially, during the lockdown when hundreds of people lost their jobs, it made it easier for these companies to get their customers.

This is different from applying for a loan in the bank which requires documentation, mortgage, guarantor and it also takes a couple of days for the amount to be credited to our account.

As a solution to escape the cumbersome process of availing a bank loan these apps available on Playstore and App store, which can be used to avail a loan of a few hundred rupees to a few lakhs. You just need to enter your Aadhar and PAN card number, and within an hour the money gets credited into your bank account.

But it’s not all bells and ribbons as it sounds, because these companies reportedly harass their clients if they don’t repay on time and also levy hefty interest rates, these companies are not even registered with the Reserve Bank of India.

The police authorities have frozen 75 bank accounts that held around Rs 423 crore in connection with the scam. Officials said that the scam involved about 30 mobile apps, and the companies charged as much as 35% interest.

Telangana police have reportedly detected transactions worth Rs. 21,000 core. The Telangana DGP’s office said that at least 30 such loan apps were available on the Google Play Store and were not registered or recognised by the Reserve Bank of India.

Police Investigation

The multi-crore scam was revealed after three people killed themselves in the last few weeks post alleged harassment by the debt recovery agents of these instant loan companies.

Hyderabad police then conducted raids in Hyderabad and Gurugram and arrested officials of Liofang Technologies Private Limited, Hotful Technologies Private Limited, Pinprint Technologies, and Nabloom Technologies Private Limited. All of these companies are registered in Bengaluru.

The investigation into loan app fraud began when a complainant reportedly told Cyberabad Police that he had availed a loan of Rs 30,000 over eight months. Though he received only Rs 20,000 after deductions, he ended up paying Rs 29,000 supposedly with interest. Even then, the loan was not cleared and he was told to pay Rs 8,634 more, the victim informed the police. He said the companies began harassing him and his family members.

Cyberabad Police Commissioner VC Sajjanar told the media that the companies divided the customers into different buckets and practiced different methods to recover the loan. “Less than the day after the due date, subtle treatment, otherwise treatment would be very harsh, threatening, and abusive,” he said. “They also access the contacts of relatives and friends of the customers and send them WhatsApp messages defaming the defaulter.”

This complaint led to a detailed investigation and unveiled some more details such as the links of these loan app companies to nine NBFCs (non-bank financial company) in Delhi, Ghaziabad, Nagpur, Mumbai, and Bengaluru.

Additional Commissioner of Police Shikha Goel told newspersons that the preliminary investigation has revealed that close to 1.4 crore transactions worth Rs. 21,000 crore have taken place so far through these app-based loan companies.

Master Plan

If you look at it, it looks like the scam is about charging extra interest. However, that isn’t the case and media reports highlighted that lot of other things are also happening in the backdrop of money lending.

This scam is serious as they are being pulled off despite strict guidelines by the RBI. These apps lure clients to take a loan, through various advertisements, calls, and so on. Further, they ask for the details of the Aadhaar card and PAN card and access to the phone book. Once you provide that, this data can be used by anyone to issue anything. When you default or even pay, they use your contacts to threaten you.

Reports said that there have been cases where company executives called family members and relatives of the victims and abused them as well.

Scam 2020 Unveiled

The scam involved loan apps like Hey Fish, Monkey cash, Cash Elephant, Loan Zone, Cash Zone, Water Elephant, Mera Loan, etc. Apart from this, the instant personal loan apps involved were — Cash Mama, Loan zone, and Dhana Dhan. The two companies named are Onion Credit Private Limited and Cred Fox Technologies, which were offering instant loans by charging hefty interest, the media reports highlighted.

As per media reports Cyberabad police are carrying out independent investigations and have arrested seven people so far which includes a 32-year-old engineer who ran money-lending operations via two companies – Onion Credit Pvt Ltd and Cred Fox Technologies, which were started in 2018-19. He also reportedly developed and sold loan apps to companies in Bengaluru.

Several call centres were set up in both Hyderabad and Gurugram, from where callers harassed people who had taken loans. More than 1,000 people, many of whom were college graduates, were employed in three such call centres, the police said, adding that they earned between Rs 10,000 and Rs 15,000 a month.

Officials reportedly said the call centers employed hundreds of youngsters trained to lure customers, entrap them into borrowing successive sums from multiple apps, and were trained to “abuse, defame and blackmail” victims in order to recover borrowed money and the interest.

How to be Safe

The Reserve Bank of India on Wednesday cautioned people against falling for such loan apps. “These platforms charge excessive rates of interest and additional hidden charges, adopt unacceptable and high-handed recovery methods, and misuse agreements to access data on mobile phones of borrowers,” the central bank said.

The police have reportedly advised that “When downloading an app, regardless of the threat level, one must always check for the permissions it asks and check the reviews as well. The most common target audiences are the educated lot and the small-time businessmen hit by the sudden lockdowns and the economic downturn.”

If at all you install any of these apps, don’t give them permission to access your personal data Consequently, if your loan is not sanctioned then take it as a red flag and reach out to authorities for help.