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Smartphone users are a lucrative target for digital lending firms.
Smartphone users are a lucrative target for digital lending firms.

App lenders scar young debtors

The amount of data being harnessed by such lenders may have wider implications for data security, say analysts

Amisha Swarnkar, a 20-year-old student from Raipur, Chhattisgarh, never imagined the trouble that a quick small loan from a lending app would bring.

In January, Swarnkar had borrowed 3,000 from an app called Slice, a Bengaluru-based fintech startup focused on India’s youngsters, according to its website. Once the lockdown began, she had to convince the company to allow a moratorium, permitted by the Reserve Bank of India (RBI). However, with the moratorium now over, the lending app has started stacking up penalties on the unpaid loan, with the recovery agents constantly calling her.

“My parents have been called, and my friends have been called using contact details from my phone," said Swarnkar. “I was even told that they could end up at my college to speak to the principal."

Mint has seen the screenshot of a text message received by Swarnkar in which a person presenting herself as Slice’s representative says she will start calling the borrower’s parents. To prove that she has access to those contacts, the representative shared two numbers belonging to Swarnkar’s mother and a friend in the same chat.

Swarnkar is not the only one at the receiving end of aggressive recovery practices enforced by these lending apps. Companies providing quick loans through mobile apps are back in focus as they try to use coercive recovery techniques that include incessant calls, and naming and shaming defaulters to their close contacts.

Mint spoke to three such borrowers who said they have been told that their contacts would get calls from recovery agents. Two of them said relatives, friends and parents have already been called by these firms seeking repayments.

In another instance, Sandipan Hazarika, a 28-year-old cricket coach from Nagaon in Assam, recalled his harassment by recovery agents for missed instalments. Hazarika said he took two loans aggregating 9,500 from CashMap app between late August and early September.

“I desperately needed the money owing to lack of income since the lockdown," said Hazarika. “The agents started calling my mobile phone and abusing me. They even called several women from my contact list in an attempt to intimidate me."

Finally, Hazarika filed a first information report (FIR) with the Nagaon Sadar police station on 11 September against the callers. Mint has reviewed a copy of the FIR.

Aided by cheap mobile data offered by telcos, Indian smartphone users are a lucrative target for digital lending platforms. However, the covid-19 pandemic has hit borrowers hard, reducing their repayment capacity.

To be sure, most such lending apps ask for permission to access phone contacts when one installs them. Apart from their utility as a safety net in case of defaults, these contacts are also examined to assess one’s credit-worthiness of borrowers, many of whom would not have a formal credit history.

“These apps not only seek your personal data but also that of your acquaintances," said Shashidhar K.J., associate fellow at Observer Research Foundation and a fintech researcher.

“Once a borrower defaults, they start harassing the person and their contacts. It is therefore imperative that RBI steps in and checks such practices."

Others argue that the amount of data being harnessed by app-based lenders could have wider implications for data security.

Pravin Kalaiselvan, chairman of Mumbai-based rights campaign group Save Them India Foundation, said he has been approached by hassled borrowers on social media.

“People use these apps when they are in dire need of money, but that does not mean firms could call or text to threaten them," said Kalaiselvan.

Emails sent to CashMap and RBI remained unanswered.

Rajan Bajaj, founder and chief executive, Slice said in an email on Tuesday, “We certainly don't want our customers to go through any unpleasant ordeal. We will look into the situation and investigate further." Bajaj added that the company has been proactive in giving moratorium to distressed customers and even have other options like restructuring into higher tenures.

“All customers need to do is just ask," he said.

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