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Loan App Fraud : Be careful before installing a loan app, otherwise you’re gone!

Easy Loan Apps Tips: You should exercise caution while borrowing from digital fintech lenders and reduce your chances of falling victim to financial fraud. Know your lender well while borrowing, choose an RBI-registered lender,

Hiral Thanawala, Moneycontrol: Digital fraud is on the rise through lending apps. Many lending apps offer more credit instantly to customers in need. But, there are several risks associated with these types of digital lending apps. The FinTech Association for Consumer Empowerment (FACE) and the Center for Financial Inclusion (CFI) recently launched the FinTech Lending Risk Barometer to systematically identify and understand risks in the FinTech industry. The purpose of this risk barometer study is to create a systematic baseline of risks arising in the digital lending industry.

This FinTech Lending Risk Barometer follows a mix of methods to identify risks. First, they conducted an online survey of 40 fintech lenders from September to October, 2022. So that the initial perceptions of lenders and non-lenders about risks are known. In-depth interviews were conducted with some selected respondents. For each risk, the survey asked each individual to rank the risks on a scale of 1 to 7, with 1 being the least severe risk and 7 being the highest. Here are the top five risks in digital landings.

Lack of credibility – 90 percent of survey respondents cited unethical fintech lenders as the top risk, with a score of 6.3 out of 7. These types of fintech lenders are unlicensed, charge exorbitant processing fees, don’t disclose terms and conditions, and adopt aggressive collection methods. These lenders harm borrowers and shake their confidence in digital lending. The RBI’s working group on digital lending found around 1,100 lending apps available to Indian Android users, of which around 600 were illegal.

Cyber ​​Fraud – 83 percent of those surveyed ranked cyber fraud and cybercrime as the second most serious threat with a score of 5.5 out of 7. There is a risk in the form of identity theft. Cyber ​​fraud has seen cases of fake pages on social media with company logos and claiming to be collecting data from fintech lenders, promising borrowers that if they apply for a loan through their pages, the borrower will get a better loan. Get rates or get discount on loan repayment. Such fake pages are very difficult to monitor.

Data Privacy – 73 percent of those surveyed cited data privacy as a serious threat. It had a score of 5.1 out of 7. The lack of good data protection laws and standards poses a risk of non-compliance for the digital fintech industry. Often, a potential borrower submits the requested personal information or rights to access messages, contacts, files, etc. on the mobile device while installing the lending application.

Lack of compliance – 65 percent of those surveyed rated non-compliance as a serious risk, with a score of 5 out of 7. Due to unclear communication with regulators, there are fears that the guidelines are being implemented differently by fintech lenders, leading to fines and penalties and reduced borrower confidence. Fintech lenders should ensure a transparent and consultative formulation of regulations and there should be systematic deliberation. Meetings should be timed for people’s accessibility to gain trust.

Improper Practice – 60 percent cited improper practice as a serious risk with a score of 4.9 out of 77. Borrowers have suffered due to aggressive marketing and collection methods. Complaints of unfair practices are widespread and not limited to urban divisions or certain localities. RBI has issued strict guidelines on recovery practices. Along with this, it has been indicated to take action against the organization that does not follow the rules.

Other Risks- There are several other risks that fall under medium term, with a score between 3 and 5. Some of these risks are regulation, data, reputation, business model etc.

Tips to Avoid Fraud: You should exercise caution when borrowing from a digital fintech lender and reduce your chances of falling victim to financial fraud. Know your lender well while borrowing, choose only RBI-registered lenders, don’t click on any links in mails or messages and stay away from pushy digital lenders with quick loan offers. If you have decided to take a loan from a digital lender then you should read the user reviews of the loan application before installing, know the processing fees and other charges. Also, read the other terms and conditions carefully before giving permission to the lending app to access your email, photos, messages, contacts, etc. while registering or installing.

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