Fraudent loan apps: The dark debt trap

Loan apps are extorting victims, leaving them bankrupt and traumatized. Police have registered over 1,000 cases, but victims are too scared to report. Police say that social media companies must frame a policy to check these apps to protect the vulnerable.

Bengaluru

Ramesh Reddy (name changed to protect privacy), 35, borrowed ₹2 lakh for a couple of weeks from a money-lending app a month ago to tide over a crisis in his business. He thought all he had to pay back was the principal sum and an interest of 20%. He repaid the loan about 15 days later on a predesignated date. “I was unprepared for what came next,” he says.

When Mr. Reddy flicked on his screen following a WhatsApp notification a day after he repaid the loan, he was shocked. The message said that ₹3 lakh was due and needed to be paid immediately. An executive of the online lending company began to message him. Mr. Reddy responded, “There may be a slight misunderstanding, as the money has already been repaid.” The executive messaged back, saying he had more to pay.

As the argument continued, Mr. Reddy claimed the executive posted a morphed obscene picture of him. “He said he would forward it to my friends and family members if I declined to pay,” says Mr. Reddy, who has still not recovered from the experience. Fearing for his reputation, Mr. Reddy paid the cash as he had received his share of the money from his business. The threats continued until the “lender” extorted ₹25 lakh.

He broke fixed deposits and withdrew money from mutual funds to make the payment. When his account hit zero and he could pay no more, the “executive” sent the photos to his contact list. “I am bankrupt,” he says, unsure if he will ever recover from the trauma and financial loss.

On July 12, a 22-year-old engineering student, Tejash Nayar ended life, alleging harassment by money lending apps. He had borrowed ₹30,000. With interest and late fee charges, the total amount to be repaid was around ₹46,000. The family has now filed a complaint at Jalahalli police station. In the death note, he wrote, “Sorry mom and dad for whatever I did. But I have no other choice other than this. I am unable to pay loans that are there in my name and this is final decision. Thank You. Good Bye.”

Loan apps advertised on social media platforms, like Facebook and Instagram, are an easy way to get money quickly and without the due diligence that banks go through. Once a person downloads an app or does a Google search for one, the algorithm kicks in, and the person’s feed is flooded with more such apps.