Authorities struggle to curb illegal micro-loan apps – The New Indian Express

Express press service

Amid a growing number of cases involving (fake) micro-lending apps, Google recently tightened its policy for listing such apps on the Play Store. It recently introduced additional requirements for developers offering personal loans in India as facilitators, requiring them to name all NBFCs and partner banks in the app description. The action by Google, which owns the Play Store app platform available on Android phones, came as law enforcement and the general public detected/reported several bad practices by these lending apps.

The Law Enforcement (ED) Directorate, which investigates money laundering cases, had summoned Google officials in April and requested a list of micro-loan apps on the Play Store. Several microcredit applications have been accused of money laundering, illegal lending, and using means of extortion to collect exorbitant interest rates from their customers.

A Google spokesperson told TNIE that the company will continue to assist law enforcement in their investigation of this issue. “We appreciate direct feedback; anyone can use a link provided in the Play Store to report any violation of a Developer Program policy by an app so that Google takes appropriate action,” the spokesperson explains. Last year, Google revised its developer program policy for financial services apps that required all banking and NBFC apps to submit a copy of the RBI license for review.

deep-rooted problem

Despite the crackdown on micro-lending apps and app stores’ efforts to implement rigorous filters, industry pundits and analysts say this is a deeper-rooted problem and that it cannot be resolved easily. According to an estimate by RBI, there were more than 1,100 such apps available for Indian Android users across 80 app stores (till last year). According to RBI, of these, no less than 600 were illegal apps. ED is believed to be investigating over 300 of them.

An official from one of the app stores told TNIE that most of the illegal practices carried out by these apps are off-store, which is beyond their control. He says if a debt collector on a loan application harasses a borrower, there’s nothing he can do about it. “All we can do is ensure maximum disclosures by the app and transparency for borrowers,” he says. Sugandh Saxena, CEO of the Fintech Association for Consumer Empowerment (FACE), says that despite Google’s new requirements to disclose the names of the NBFCs they are associated with, some apps can easily evade scrutiny by naming fake NFBCs or NBFCs whose licenses have been revoked.

A manager of one of the app stores quoted above says: “We are not an investigative agency, as a platform we can verify (the information provided by the apps) to the best of our ability. abilities.” In some cases, genuine NBFCs are involved in illegal practices using micro-lending applications. The ED even made a statement earlier this year that NBFCs in India facilitate unscrupulous loan applications to use their license and make large scale loans in clear violation of Reserve Bank of India (RBI) standards. .

NBFCs would link to several fintech apps and allow them to engage in lending business after accepting “security deposits” from them. In one particular case, the ED discovered that the NFBC lacked the required funds of Rs 10 crore, yet had lent (through its mobile app partners) over Rs 2,200 crore in a short time. App store managers say that not all apps are downloaded from app stores, there are sideloading cases where the app link can be sent through messaging apps and they don’t do not need to be listed on the Play Store.

Requires concerted effort

It needs the collaborative efforts of industry, app stores, as well as law enforcement agencies, to combat the threat of illegal lending apps. Sugandh Saxena of FACE, an association of 17 fintech companies, says it is trying to address the issue through a multi-pronged approach, including identifying/monitoring apps for suspicious credentials and activity, reporting to relevant agencies for action and educating customers. for safe lending practices.

“Using market intelligence, we also identify patterns of these dubious apps and share them with agencies such as Google Play Store for further investigation,” she says. The Google spokesperson said it reviewed hundreds of personal loan apps in India to ensure they complied with the relevant policy, based on reports submitted by users and government agencies.

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