- Date : 15/03/2023
- Read: 3 mins
A look at the risks of engaging with a loan app fraud lender
There has been a sea change in the manner in which we can get a loan. You can still visit a branch, meet the concerned person and probe the possibility of a loan. Or you can apply for it through online banking. In fact, you don’t even need a bank to get a loan these days. Fintech companies, financial institutions, and even mobile apps can be the source of your fund.
But with this digitisation, the problem of loan app fraud has become prominent. The loan scam saga is a common threat for potential borrowers as digital lending becomes more and more popular. These loan fraud practitioners offer credit to desperate borrowers instantly but can indulge in data privacy breaches and cyber fraud later.
Here are the potential risks of engaging with a dubious digital lending organisation.
1. Not trustworthy – These fraud loan apps and fintech can be unauthorised operators. They can charge exorbitant interest rates and other charges. Once repayment is due, they can engage in an aggressive collection mechanism, which can cause distress to the borrower. An RBI working group noted that of the 1100 digital lending platforms operating in India, as many as 600 were illegal.
2. Cybercrime – These lenders often indulge in cybercrimes to lure potential borrowers. They forge digital documents and web pages to appear authentic. They also misguide the borrower into believing that they are operating on behalf of a legitimate fintech company. Again, forgery and misrepresentation play a major role in these types of activities.
3. Privacy issues – Loan applicant submits various personal documents to the loan app while applying for the loan. The app also seeks and gets access to private folders in the mobile phone like messages, contacts, files etc. Fraudulent lenders gain these access and documents, but often do not follow clear data protection and privacy standards. This puts your privacy at risk.
4. Compliance issues – Illegal lenders don’t have any communication with the regulatory bodies, and avoid public disclosures as a result. There is a lack of transparency in the charges and terms of a lender when it is not under the ambit of the regulators.
5. Other malpractices – Apart from privacy issues and unethical collection practices, these lenders often follow unhealthy marketing practices. While collecting repayments, these fintechs have caused harm to the borrowers and there have been reports of the same from across the country. RBI has issued strong guidelines on how to carry out loan recovery and warned strict action on lenders that do not comply.
Before tapping on an app to avail of a loan, you must look for customer reviews of the lender and look into their authenticity. Make sure that these loan frauds in India don’t trouble you with unhealthy marketing, recovery and lack of data privacy practices – all in the name of a few quick bucks.