Beware Of Apps Offering Cash Loans! Government Aims For Crackdown, New Regulations Likely

The central bank is expected to come up with its findings on the issue by mid-April following which the government will either use existing legal frameworks or bring in new legislation to ensure lendings are done only by registered companies and there is a dispute resolution mechanism in place.

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Aiming to curb the malpractices by apps offering cash loans, the government aims to clampdown on such businesses and explore new regulatory options putting a check on various activities from coercive recovery procedures, capping the rate of interest, and mandatory registrations.

Of late there have been rising cases across the country in which people have fallen into debt traps, with at least 12 cases leading to suicide since 2020, as per the Hindustan Times report.

What is the need for a crackdown?

As per the report, such apps end up getting access to sensitive personal information such as files, photos, emails, and contact lists through their permissions request which was analysed from 10 apps available on Google Play Store, as per the publication.

In some of the cases, the app companies have allegedly reached out to the customer contacts in an attempt to socially shame them without consent. In fact, the concerned consumers affected by such practices, also protested on social media platforms using the hashtag OperationHaftaVasooli. They have claimed to be facing cyber-bullying and doxing and in some extreme scenarios, the recovery agent also demanded nude photographs, as per the report.

What is the Reserve Bank of India working on?

On January 13, the central bank has formed a working group on digital lending, including lending through online platforms and mobile apps. As per the sources of the publication, such incidents have gone up during the pandemic and the government aims to crackdown on such apps because of the growing menace. Such activities cannot be allowed in the garb of digitalization and online lending

Often seen as fly-by-night operations, such lending companies in absence of concrete tech and financial regulation experts believe such companies take advantage.  But now they pose serious threats from infringing privacy, data security, and consumer protection.

As per the report, the central bank is expected to come up with its findings on the issue by mid-April following which the government will either use existing legal frameworks or bring in new legislation to ensure lendings are done only by registered companies and there is a dispute resolution mechanism in place.

Google has so far removed about 100 instant loan apps from its PlayStore in the country that were involved in alleged collection of personal data and its misuse, fraudulent and unlawful practices of physical threats, and use of other coercive methods for recovery of loans, according to the Ministry of Electronics & Information Technology (MeitY), asp er IANS report.

Answering a query in the Lok Sabha, the IT Ministry said that upon being notified by law enforcement agencies of the availability of certain money lending apps that were possibly not in compliance with the applicable legal and regulatory framework, Google has already removed about 100 such apps since December 2020 till January 20, 2021.

The IT ministry said it received a number of public grievances against frauds and malpractices by few online instant loan applications available on the internet including on Google PlayStore.