Mudra Compass

A young student named Hiren (Changed name to hide the identity), aged 22, and tragically took his own life by hanging himself in his home in Bengaluru. Hiren, who was studying engineering in Yelahanka, had been subjected to harassment by representatives of a Chinese loan app. Hiren had borrowed money from a loan app called ‘Slice and Installation’, but due to financial difficulties, he was unable to repay the loan. Distressed by his inability to fulfill the loan obligation, Hiren was constantly threatened by the loan app’s agents, who even resorted to the threat of making his private photos public.

In a heart-wrenching suicide note, Hiren apologized to his parents, expressing that he saw no other way out of his situation. He mentioned the loan he had taken in his name as the reason for his drastic decision and bid farewell.

Just three days prior to Hiren’ suicide, his father had appealed for an extension to repay the loan in full. However, despite this plea, the loan app’s agents continued to intimidate Hiren. On the evening before his death, they made numerous calls to him, which ultimately drove him to take his own life.

In the wake of the COVID-19 pandemic in India, the business of loan apps has experienced a significant surge. These Chinese lending companies have capitalized on the country’s economic downturn, offering quick loans without extensive documentation or verification. Although a small amount is immediately transferred to the user’s account upon downloading the loan app, the interest rates associated with these loans are exorbitant, ranging from 200% to 500%.

Driven by the allure of instant loans and the absence of strict requirements, people fall into the trap set by these loan apps. However, once the borrowed money is repaid, these companies engage in blackmail and harassment tactics. Threatening calls are directed not only towards the borrower but also their family members. These loan apps possess detailed user information, allowing them to further exploit borrowers by sending manipulated and explicit images to their families. In such dire circumstances, individuals are coerced into paying significantly more than the original loan amount.

Regrettably, many individuals, like Hiren, find themselves so overwhelmed by the torment inflicted by these apps that they resort to suicide. Yet, these loan apps continue their operations, perpetuating the cycle of victimization by targeting new individuals.

Here’s an outline of how these Chinese loan apps operate:

• Users install the loan app enticed by the prospect of obtaining immediate loans.

During the download process, the app requests permission to access various personal data, including the user’s gallery, contacts, and location. Users often grant these permissions without much consideration.

• Sometimes, the app secretly installs third-party apps or malware on the user’s device, enabling the collection of personal information without their knowledge. This data is then used for blackmail purposes.
• The loan app only transfers a partial amount, typically 60-70% of the requested loan, into the user’s account.
• For instance, if a person borrows Rs 6,000, they would receive only around Rs 3,700-3,800, with the remaining amount, approximately Rs 2,200-2,300, deducted as service and other charges.
• Consequently, the borrower is obligated to repay the full loan amount, along with exorbitant interest rates. In just a week, the interest alone can accumulate to an outstanding balance of 40,000-50,000 rupees.
• This initiates a cycle of blackmail and exploitation, which continues until the borrower is forced to pay several times more than the initial loan amount. These loan apps specialize in providing small loans ranging from 2,000 to 5,000-7,000 rupees.

It is important to be aware of potential loan app traps and take steps to safeguard yourself from fraud. Here are some general tips to help you stay safe:

1 Research the lender – Before applying for a loan through a mobile app or any online platform, thoroughly research the lender’s reputation and legitimacy. Look for reviews, check their website, and verify their contact information.

2 Check for licensing and accreditation – Legitimate lenders are typically licensed and accredited. Ensure that the loan app or platform is authorized to provide loans in your jurisdiction and has the necessary credentials.

3 Be cautious of unsolicited offers – Be wary of unsolicited loan offers you receive via phone calls, emails, or text messages. Legitimate lenders usually don’t contact potential borrowers out of the blue.

4 Read the terms and conditions – Carefully review the terms and conditions of any loan app or platform before proceeding. Pay attention to interest rates, repayment terms, fees, and any other relevant details. If something seems unclear or suspicious, seek clarification or consider looking for an alternative lender.

5 Protect your personal information – Only provide your personal and financial information to trusted and reputable lenders. Be cautious about sharing sensitive data over unsecured networks or with unknown or unverified parties.

6 Be wary of upfront fees – Legitimate lenders usually deduct fees from the loan amount rather than requiring upfront payments. Be cautious if a lender asks you to pay an upfront fee before receiving the loan.

7 Verify contact information – Ensure that the loan app or platform provides clear and verifiable contact information, including a physical address, phone number, and customer support email. Try reaching out to them with any questions or concerns to assess their responsiveness and professionalism.

8 Monitor your credit and financial accounts – Regularly review your credit reports and monitor your financial accounts for any unauthorized activity. Promptly report any suspicious transactions or discrepancies to the relevant financial institution or credit bureaus.

It is always essential to exercise caution and due diligence when dealing with financial matters. If you encounter a specific loan app or suspect fraudulent activity, report it to the appropriate authorities or seek legal advice to protect yourself and others from potential harm.