Tamil Nadu politicians urge government to ban online loan applications

Tamil Nadu politicians have called for a ban on online lending apps following reports that employees of these apps are bullying customers on loan repayments. These apps, called payday loan apps, offer short-term loans at high interest rates. But they are unregulated entities and are not allowed to lend credit in the country.

At least three people have committed suicide in recent weeks after being harassed by employees of these apps. A 23-year-old computer scientist in Chennai committed suicide after taking out a loan from Rupee Bazaar. He allegedly complained to the police of alleged intimidation by the employees of the lender. In an earlier case, a borrower from Tamil Nadu committed suicide after being harassed by a representative of Udhaar Loan. In addition, Andhra Pradesh, an MBA graduate from Visakhapatnam, hanged herself after borrowing 25,000 from various mobile apps.

“Ban online loan applications, bring in regulations”

In a statement released Friday, S Ramadoss, founder of Tamil Nadu’s Pattali Makkal Katchi, called for a ban on these loan applications, adding that it was reprehensible that no action had been taken against them so far. , reported The Hindu. “Online loan sharking should be banned. Otherwise, the number of people committing suicide would only increase, ”he said.

Earlier this month, Dr Senthilkumar, Member of Parliament from Tamil Nadu, wrote to the finance minister asking the government to ban apps, monitor their activity and put in place strict regulations to ensure that the general public is not affected. “The current COVID-19 pandemic has forced people to opt for personal loans online. There are new online lending companies that don’t have bank approval or physical locations, long business histories […] To ban online loans loan applications because many families are suffering and threatening appeals are made to everyone on their contact list of the person who used the loan through the loan application and few suicides are also reported, ”he said in a letter.

Night flight lenders

These apps have gained resonance among young people at a time when more than 41 million young people have been made unemployed by the pandemic. According to a blog post published on November 10 by Cashless Consumer, at least 10 of these loan applications have gained between 400,000 and 1 million users in a short period of 2-3 months.

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Recently, Google removed five digital loan apps that offer short-term digital loans at high interest rates from its Android Play Store. The tech giant said these loan apps violated their policies, but for months they were up and running after slipping under the radar. To date, while one of the apps mentioned in the Cashless Consumer blog post remains on the Play Store, MediaNama has found several similar apps and complaints while reading Twitter and on the mobile Play Store. Some of these apps offer loans ranging from 2,000 to 5,000 up to 2 lakh with interest up to 36%.

In June, the Reserve Bank of India released guidelines for banks and non-bank lenders offering digital loans to better educate consumers. However, since the central bank directive applies to regulated entities, it does not exercise any control over these payday lending apps, so Google is responsible for hosting them. While the RBI has ultimate authority over how banks and non-bank actors disburse loans and conduct their business, including debt collectors, it has a mediator program for both types of lenders and also set up a digital payments ombudsperson in January last year. According to the RBI Ombudsman’s 2018-19 Annual Report, about 20% of the nearly 2 million complaints received concerned non-compliance with the Fair Practices Code.

In addition, the Banking Codes and Standards Board of India has published a Code of Customer Rights detailing the practices banks should ensure their debt collectors follow when contacting customers. while two industry bodies, the Fintech Association for Consumer Empowerment and the Digital Lenders Association of India, both also have codes of conduct.

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David A. Albanese