Fake Loan Apps Scams 2023: Modus Operandi And Prevention

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There has been a sharp increase in the number of complaints related to Loan Apps Scams in India in FY 2021 and 2022. It is estimated to increase in 2023. Thanks to the smartphone craze and cheap data plans, people who are in need of money are falling prey to Scam loan apps.

Loan apps scams are also commonly known as Chinese loan app scams since they were originated in China. Now it is a worldwide spread cybercrime with a huge number of victims.

Modus Operandi of Loan Apps Scams

People are attracted by promising more loan amounts without paperwork. Customers will get the money immediately but less than the promised amount. As soon as the customer installs the app, it will have access to the customer’s sensitive information.

Using this information, the company will adopt a rigorous recovery strategy. Loan agents will abuse and harass customers and call friends and relatives of customers from their contact list.

In some cases, customers died by suicide after cyber fraudsters circulated purportedly morphed pictures of failing to repay loans taken through the instant loan mobile app.

Business Model of Loan Apps Scams

RBI’s Take On Loan Apps Scams

The Reserve Bank of India’s (RBI) Working Group on Digital Lending said in a report that there are 600 illegal loan apps for Android users in India in several app stores. Around 1,100 unique Indian loan apps with keywords like a loan, instant loan, quick loan, etc. are available in the Play Store. 

With an aim to curb illegal digital loan activities, RBI has proposed to make a new law for the Government of India. The details have been mentioned in a report by the RBI Working Group on digital lending.

According to the RBI, Maharashtra has the highest number of complaints of loan apps scams. Followed by Karnataka, Delhi, Haryana, Telangana, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu, and Gujarat.

Check Before Taking Loan From Online Apps

1. Is Lender Approved by the RBI?

The first and foremost thing a customer should do before applying for a loan on the app is whether the company has been approved by the Reserve Bank of India. 

This ensures that you do not run into repayment-related problems as companies that do not follow the RBI guidelines are expected to harass the customers after availing of the loan.

2. Does the Lender Have a Website and Office?

Check if the lender has a proper website and whether it has mentioned all the details about the company. Check if the lender has a physical office. In the cases of most loan apps scams do not have websites or physical offices.

3. Check Reviews

Check customer reviews that give you a fair idea about the lender. And avoid taking loans from apps without a Verify badge. Find out whether the app is associated with a bank or a Non-Banking Financial Company (NBFC) and vice versa.

4. Read Terms and Conditions

Many of us disregard the section titled “Terms and Conditions.” According to studies, most consumers pay attention to the ‘Terms and Conditions without recognizing that it is a legally binding contract between you and the company.

Always carefully read the ‘Terms and Conditions,’ particularly while conducting online financial transactions.

There have been allegations of people and small businesses falling victim to an expanding number of unlawful digital lending platforms/mobile apps promising rapid and hassle-free loan approval.

These complaints also describe borrowers being charged exorbitant interest rates and additional hidden charges, unfair recovery methods and the exploitation of agreements to access data on borrowers’ mobile phones.

Conclusion

People should not take loans from applications that provide loans without considering their credit history and promising rapid approval. Never pay to have a loan accepted. The processing fee is frequently added to your loan or paid straight to the bank or NBFC that makes the loan.

It is a red flag if you are being asked to pay a part of the loan in advance for processing or need to pay cash or transfer money to any personal account. 

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