How to screen for unauthorized lenders and avoid falling into debt traps?

Given that these applications were largely ungoverned on Google’s Play Store, it is imperative for smartphone users to be able to learn how to differentiate between authorized lenders and unauthorized lenders. Practices such as harassment, cyber-bullying etc. are illegal and any app that does this is effectively part of the illegal instant loan app racket that the Indian government recognizes as a criminal enterprise.

While this might seem like an obvious step to take, certain circumstances that require the sudden infusion of cash can drive even the most cautious individuals to drop their guard. Performing basic checks like how much is the interest being charged, running a google search, researching the company’s origins, reading their terms and conditions etc. are non-negotiable steps to take if one is to ascertain the authenticity of a digital lending platform.

The RBI has already released two separate communiques condemning these apps and has gone to great lengths to remind the public of it’s mandate requiring all digital lending platforms to disclose the names of their lenders. Upon doing your research, if you are unable to find who’s backing the platform, then the customers must exercise their caution.

For the longest time, many apps, especially in Google’s ecosystem required permissions that were often invasive and harvested vast amounts of customer data. Many smartphone users have come to get used to this blatant violation of customer safety and privacy and don’t think twice before granting an unknown app permission to their contacts, gallery, etc.

Unauthorized lending applications are notorious for harassing defaulters by constantly bugging people on their contact list, which in turn is only possible when the app has access to the contacts on your phone. No authorized lender would resort to such techniques and customers should perform their own diligence especially when digital lending applications ask for access to sensitive information.

One of the features that these apps rely heavily on market themselves is the promise of a hassle-free, instant loan approval procedure. Such a promise succeeds in luring unsuspecting and desperate individuals to use these apps, who then end up getting caught in their vicious debt collections and harassment cycles.

While going through the loan approval procedure, keep an eye out for peculiar requests that may masquerade themselves under the guise of being a part of some KYC (know-your customer) procedure.

At any point of the application/approval process, if you come up against a certain mandate that seems unusual or causes discomfort, always opt out of the process and take your time to fully understand or consider other alternatives before returning to the app in question. There are many respectable platforms in India that are working towards democratizing credit access and you needn’t resign yourself to one that gives even the slightest hint of being unauthorized or dubious in its operations.

While the smartphone revolution has been a boon for the financial ecosystem and the financially depressed sections of India, it has also become a hunting ground for malicious parties that seek to make a quick buck by preying on the weak and vulnerable sections of society. Usury has gone digital and it is imperative that customers educate themselves about the digital lending landscape thoroughly before choosing to avail their services.