In recent years, there has been a rise in the number of loan app scams in South Asian and African countries, such as India, Pakistan, Indonesia, Kenya, and Nigeria, where poor populations are their easy target. These scams prey on people who need quick cash and offer loans with little paperwork or documentation. However, once the loan is taken out, the borrowers are often met with high-interest rates, hidden fees, and aggressive debt collection practices.

These loan apps have even used threats and intimidation to collect debts. This has led to several people being harassed, blackmailed, and even violently threatened. In a recent incident, a man from Rawalpindi, Pakistan, committed suicide after being blackmailed by one of these apps’ handlers over failing to pay back debts.

India and Indonesia have already started crackdowns on companies that prey on people who need quick cash and offer loans with little paperwork or documentation. According to India Today, Google removed over 3,500 loan apps in India for misleading people. In 2021, Google updated its policies for financial service providers, making it mandatory for these companies to have a license from the Reserve Bank of India to provide loans.

The Popularity of Easy-Loan Apps In Pakistan:

Twenty-seven instant loan-providing apps were among the top 100 applications on Google Play in Pakistan until June 28. Among those, only eight apps were downloaded more than 150 million times. The growth of these eight apps was nothing short of astonishing. In June 2021 (up to the 26th), the estimated downloads skyrocketed by a staggering 51,863% year-on-year to 1.78 million, from a mere 3,442 in the same period of 2020.

Now, regulatory authorities and law enforcement agencies are in action after these companies took a precious life of a 42-year-old man through threats and blackmailing. The Securities and Exchange Commission of Pakistan (SECP) has taken steps to crack down on loan app scams, but the problem is still widespread. In 2022, the SECP banned 72 fraudulent loan apps, but many more are still operating illegally.

The SECP received 1,415 complaints against the registered and 181 against unregistered loan companies till May 2023. According to SECP spokesperson Musarat Jabeen, only ten loan apps are registered under the Companies Act 1956, while 75 other apps working illegally have been identified. She said that SECP is taking action with the help of local regulators such as the Pakistan Telecommunication Authority (PTA), State Bank of Pakistan (SBP), and Federal Investigation Agency (FIA). At the same time, Google and Apple have also been approached to remove illegal apps from operating systems. Jabeen added that action would be taken against the apps over breach of users’ privacy under the Anti-Money Laundering Act 2010 and the Prevention of Electronic Crime Act 2016.

According to FIA Cybercrime Wing Additional Director General Ahmed Ishaq Jahangir, only nine easy loan companies have been registered with the SECP. He said that the modus operandi of these companies is to have illegal access to the contact lists and photo galleries of the loanees to blackmail them for extorting more money.

However, these registered apps, which include Zaroorat Cash, Barwaqt, Qisstpay CreditCat RazCash, Easy PK Loan, Finja, Credit Per, Abhi, Muawin, Zoodpay & ZoodMall and Udhar-Paisa, also attract cash-strapped people with their instant loan offers and start blackmailing them days after paying money.

How to Get a Loan Through Apps:

• If you consider taking out a loan from an app, you should keep a few things in mind to protect yourself from becoming a scam victim.
• Do your research before downloading any loan app, and read reviews from other users. This will help you identify any potential scams.
• Beware of high-interest rates. Loan apps often charge very high-interest rates, so read the terms and conditions carefully before you take out a loan.
• Avoid apps that require access to your data. Some loan apps will ask for access to your data, such as your contact list or photo gallery. This data can be used to harass or blackmail you if you default on your loan.
• Be aware of the debt collection practices. Some loan apps use aggressive debt collection practices, such as threats and intimidation. If you are considering taking out a loan from an app, ask about the debt collection practices before you do so.
• If you have been a victim of a loan app scam, you can do a few things.
• Report the scam to FIA and the SECP. The SECP has a dedicated team that investigates loan app scams. You can report the fraud to the SECP website or their helpline.
• File a police report. You can also file a police report against the loan app company. This will help to build a case against the company and may help to recover your money.
• Seek legal help. If you have been harassed or threatened by the loan app company, you may want to seek legal help. A lawyer can help you understand your legal rights and represent you in court if necessary.

Loan app scams can be very harmful, but there are steps you can take to protect yourself. By researching, being aware of the risks, and reporting scams to the authorities, you can help keep yourself safe from these predators. Here are some additional tips to help you avoid loan app scams:

• Only borrow money from legitimate and regulated lenders.
• Never give out your personal information, such as your CNIC number or bank account details, to an app you don’t trust.
• Be wary of apps that offer loans with very low-interest rates or no fees. These loans are often too good to be accurate and maybe a scam.
• Read the terms and conditions carefully before you take out a loan. This will help you understand the loan terms and the fees you will be charged.
• If you have any concerns about a loan app, contact the SECP or your local police station.

FIA’s Additional Director General Ahmed Ishaq Jahangir asked people to beware of fraudsters and blackmailers and instantly inform the FIA at 051-111-345-786 in case of such an incident.