Fake Lending Apps: How To Steer Clear Of Fraudulent Apps And What To Do In Case Of Losses
Thorough research, restricting app permissions, and general maintenance of caution are advised.
Fake digital lending apps that dupe unsuspecting customers out of their hard-earned money are increasingly becoming a menace in India. So much so that the Reserve Bank of India (RBI) is in the process of preparing a “Whitelist” of apps that will be allowed to be listed on the Google Play store and Apple’s App Store. Such fraudulent apps appear legitimate at the first glance, and owing to their listing on Google or Apple’s app platforms, users tend to trust the legitimacy of these apps and go on to share their banking and KYC details with these platforms, which eventually leads to money drained out of their account either automatically or after pushing the customer into psychological stress by extortion.
ABP Live recently took a deep dive into one such fraudulent app, called Wonder Loan, which was found to disburse unsolicited loans to users when they register and enter their KYC details. After receiving the loans they never asked for, users are given a time limit of seven days to repay the amount. If they can’t, company executives start calling them up, threatening to harass their contacts and friends, pushing users into thorough emotional distress.
Why are fake lending apps so rampant in India?
The aforementioned case is just one of many instances where unsuspecting users are duped out of their money by shady apps. As per MyFundBazaar CEO and founder Vinit Khandare, nearly half of the 1,100 digital lending apps available during January and February 2021 were illegal. “While unforeseen job losses, depreciating finances and mounting medical expenses compelled millions of Indians to download instant loan apps to make ends meet, a pandemic-infused nation soon became a breeding ground for swindlers looking to exploit gullible citizens,” Khandare told ABP Live.
“Online frauds will increase in India as digital penetration keeps increasing and insurance against such frauds is advisable since more users are vulnerable to digital frauds and lack of knowledge regarding cybersecurity,” said Rajan Gupta, CEO, SmartLoans Kart.
How can users stay safe from fraudulent apps?
When users download an app, they usually check out the number of five-star reviews that app has on Google Play and the number of downloads it has seen. The issue is that some apps which have several 5-star reviews sometimes earn a ‘verified’ badge on the App Store or Play store. The high number of reviews and the occasional verified badges make customers believe in the legitimacy of the app, leading them to download them without concern.
However, there are certain red flags that can warn a user of a fraudulent app.
For starters, if you come across hundreds and thousands of five-star apps from users with generic-sounding names, chances are they are generated by bots. This was the case with the Wonder Loan app, which has seen over 10 lakh downloads and is rated 4.5 stars with over 50,600 reviews.
“All legitimate lending apps are from or backed by lenders/banks/regulated institutions, and their names are appropriately displayed on the app and on the disclosures. So, a customer should always check who the publisher of the app is and whether they have multiple apps on the Play store, for instance,” advised Amit Das, CEO and co-founder of Think360.ai. “Customers should also check the website of the company that has published the app, and whose contact information is published as part of the app detail.”
It’s always a good idea to do proper research before dealing with loan apps. This involves verifying a platform’s registration with regulatory bodies like the RBI, SEBI, or AMFI.
“An ideal scenario would be to go through a financial platform’s terms and conditions and understand its workings. If this is not always viable, a quick google check on the company’s registration number can also be helpful,” said Satyajeet Kunjeer, founder and CEO, Deciml. “Take stock of whether the company details and registration number match; what people are behind the platform and whether they really are a registered and regulated entity. If this registration number itself is missing, that is definitely a red flag.”
“If the lender is not asking you for your credit history or is pressurising you to finalise as soon as possible, then those should be your red flags to know something is fishy,” advised LoanTap CEO Satyam Kumar. “One should be mindful of what kind of permissions they give on your phone to any app. Be careful not to approve permissions for personal data like pictures, contact addresses, and details.”
“Borrowers should carefully go through the terms and conditions and the privacy policies of a loan to make an informed decision. Key factors such as repayment schedule, charges, and default charges should never be overlooked,” said Mahesh Shukla, the founder and CEO of PayMe. “Opting for a loan from an unofficial or unverified source can result in major losses as one will also be sharing his/her confidential information such as an address, PIN, bank details and account number.”
"Know your lender' is just as or probably even more important than 'Know your customer' when it comes to lending apps," said Kaustubh Padakannaya, Co-founder, Pyse. "When you come across any such app, make sure to find out who the lending partner is. Lending partners for these apps are almost always NBFCs. Try to find out the name of this partner so you can search them up online and check their reviews out and see if they have been reporting credit data to CIBIL on time or if they have been banned by RBI."
“Beware of any app that seems too good to be true. If an app promises unrealistic returns or seems to be hiding important information, it's probably a scam,” said Mayank Goyal, founder and CEO, moneyHOP, adding a seemingly simple yet pertinent tip: “Trust your gut. If something feels wrong, it probably is.”
"One leading indicator of a red flag would be the rate of interest you are being offered," advised Nikhil Kurhe, CEO and co-founder Finarkein Analytics. "Ideally, you should not see a variation of more than 50-150 basis points on the rate of interest being offered by lenders. If the variance on the digital lending app is too high, say 3-5 percent, be suspicious."
“Beware of unsolicited investment opportunities that come your way via email, SMS, or WhatsApp from people you don't know. More often than not, these are scams designed to take your hard-earned money,” said Elearnmarkets co-founder and CEO Vineet Patawari.
What to do in case of a loss?
Alerting authorities is the first and foremost thing you should do in case you do suffer a loss via a fraudulent app. “It is vital to inform your bank and see if you can freeze the money if it is still in transit,” advises Mudrex founder and CEO Edul Patel. “The victim and the bank should then immediately report to the cybercrime authorities for investigation.”
A loss is usually compensated by the bank within 10 working days, via insurance, said Khandare. “Customers need to perpetually keep their respective banks about the unauthorised transaction within 72 hours. If a customer fails to inform the bank about the loss within three days then he or she can face a loss of up to Rs 25,000.”
As per Dr Ravi Modani, the founder and CEO of 121 Finance, compliances are already in place to counter cases of fraud. “The consumers’ options are to make complaints and follow up religiously to try to recover the losses. These complaints can be made on multiple portals depending on the nature of the activity,” Modani said.
Users can file a grievance redressal with the RBI. You can also choose to reach out to the National Consumer Helpline.
“Apart from these, an official complaint can be made to the Play store/App Store to take the app off their platform,” added Modani.
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