The proliferation of small-time or micro-loan apps catering to the increasing demand for credit, particularly among the younger population, has raised concerns about their legality and ethical practices. Despite the promise of instant loans with minimal documentation, some loan app operators are accused of harassing their clients and leveraging predatory tactics to extract excessive interest rates. These illegal loan apps are also found to misuse users’ data and personal information. This practice has prompted the Indian government to seek strict digital-lender regulations.
Often referred to as payday loan apps or paycheck advance apps, these mobile lenders work by providing cash advances tied to your next payroll deposit. Borrowers need to download the loan app, provide access to their bank accounts and can request a lump sum of money in a few minutes or hours. Once approved, they must pay back the advance plus additional fees by their next payday.
Customers and digital rights groups have criticized some of these apps for infringing upon their privacy and charging exorbitant interest rates that drive low-income families into debt. The Kenyan central bank has even called for regulation of loan apps after some of them were found to be sharing borrowers’ personal details with third parties. This is a significant concern, especially as these apps are accessible to individuals who may not be aware of their privacy rights or are unfamiliar with the laws in their country.
Illegal loan apps can be downloaded through search engines or social media platforms and are usually branded as “instant loans,” “personal loans,” “aad-haar loans,” and “cash loans.” They typically ask for basic information such as phone numbers and email addresses. They can use various permissions on users’ devices, including contacts, photos, videos, financial records, and other sensitive data. This allows them to access and profit from personal information that could be used for blackmail, a practice cited by some victims who have committed suicide after being subjected to extreme harassment by loan app operators.
Many of these apps are not regulated and do not adhere to the guidelines established by the Reserve Bank of India (RBI). They have been accused of illegally collecting and exploiting sensitive information such as financial records, contact lists, and photos or videos from their users. These apps also report selling their client data for advertising and marketing purposes. To curb this issue, Google has banned personal loan apps from the Play Store that require repayment periods of 60 days or more or have an APR of 36% or more from accessing sensitive data on Android devices.
An online loan aggregator like Dime Alley can help you find the best loans for young people and avoid predatory lenders. Our free tool uses years of relationships and thousands of data points to match you with the lender most likely to approve your loan application with the best terms. You can complete our simple application in less than a minute and receive an instant decision on your screen.
