A Chinese loan application fraud and extortion ring was busted, and four persons were taken into custody, including the scheme’s creator. The 149 employees who were hired to assist in running the racket have received notices in the interim. Seized items include 153 hard drives, three laptops, 141 mobile phones with keypads, 10 android phones, and four DVRs.
30142 out of 50,035 cybercrime incidents reported in 2020, or approximately 60.2% of all instances, involved fraud, according to the National Crime Records Bureau’s most current statistics (NCRB). Although everyone may become a victim of cybercrime, the elderly and young are particularly vulnerable. The elderly are less familiar with online safety precautions and less tech adept. They are therefore open to many forms of deception.
Millennials (aged between 24 and 37) in India are among the demographics most vulnerable to online scams, according to the Microsoft 2021 Global Tech Support Scam study report, with 58% of those who were involved in a scam suffering financial loss.
Millennials are the generation most affected by online payment fraud since they predominate among Indian consumers of online transactions. According to the report, they are more likely to click on pop-up adverts or visit phoney websites.
A working group on digital lending at the RBI conducted a research that found that online platforms and mobile apps “offer distinct and increasing concerns for customers, since the focus is more on convenience or ease of access than security.” The millennial generation may discover it easier to “set up” an account using a digital lending app (DLA) from an unregulated fintech provider or shadow lender than to use a tool or channel provided by established banks or non-banking financial organisations (NBFCs).
Chinese Loan App Probe
The Registrar of Businesses (ROC) and the Serious Fraud Investigation Office (SFIO) launched an investigation into a number of front companies used by these Chinese lenders early this year. These lenders were discovered to be operating illegally under many domestic laws. The Enforcement Directorate (ED) thereafter opened a thorough investigation.
Four persons, including the scam’s leader, were detained for participating in a Chinese loan application fraud and extortion ring. In the meanwhile, notifications have been given to the 149 employees who helped operate the scam. Seized items include four DVRs, 141 keypad mobile phones, three computers, 153 hard drives, and 10 android phones.
The “On Stream” lending app requested his permission to view his contacts and gallery after being downloaded. He was subsequently given a loan of Rs 6870, and the accused began tormenting him using his connections and access to his images. In his complaint, the guy said that despite having given them one lakh so far, he was still being pressured to pay more.
When the suspects were located during the police inquiry, it was discovered that Fly High Global Services and Technology had been operating a sizable call centre on three floors of a building in Dwarka Sector 7 for the last two years.
They purchased 300 SIM Cards in the name of Silpani International and used 100 SIM Cards out of this for the purpose of sending derogatory WhatsApp messages to compel victims to go with their extortion threats, police said.
The accused, in association with their Chinese counterparts, extorted huge amounts of money. So far, they have siphoned an amount of Rs. 10 crore to two Chinese people, namely Albert and Trey, and have received Rs. three crore as commission since March, 2021. They used to talk on the multilingual Ding Talk app. The alleged firm used to keep harassing people by morphing their photographs.
The syndicate was operating in a very clandestine manner under criminal conspiracy from Sector -7 Dwarka. The telecallers used to threaten Chinese loan fraud victims in order to extort them and send chats with derogatory remarks morphing photographs of victims and their relatives, even photographs from Aadhar and Pan cards.
Anil, the mastermind behind the racket, was allegedly contacted by two Chinese people, Albert and Trey. He used to talk to them on Ding Talk App. With their help, the accused started this extortion racket by employing nearly 150 people.
Has any action been taken by the RBI against these Fake Lending Websites?
The RBI working group on digital lending made many recommendations, including the creation of a self-regulatory organisation and a new law to outlaw unauthorised lending. The Certificate of Registration (CoR) granted to P C Financial Services Pvt, which conducted mobile app-based lending activities through the app “Cashbean,” was revoked by the Reserve Bank last week. The business was discovered to be “charging its borrowers usurious rates of interest and other fees in an opaque manner, in addition to engaging in the unlawful use of RBI and Central Bureau of Investigation logos for recovery from the borrowers in gross violation of the Fair Practices Code.
It is also important to highlight that no regulatory action has been taken to far against regulated firms that offered a platform for consumer exploitation. It is crucial to remember that not all allegations of shady behaviour were directed at unregulated businesses, and some regulated organisations also played a part in giving shady applications a platform by acting as sheet anchors. Although the number of complaints is listed, the report contains no information about how RBI responded to these concerns. RBI’s duties were limited to creating the committee and giving advice.
To prevent it in the future and increase consumer confidence in the regulatory system, it is important to emphasise the regulator’s moral inability to accept responsibility for the supervisory errors. The guiding philosophy, which appears to be echoed in the working group report, is to simply prioritise market expansion and business friendliness while leaving parts of regulation, such as consumer protection, to self-regulatory organisations (SROs). It is disturbing to see the regulator shunning its duties and shifting to a self-regulatory approach while sacrificing consumer protection.
The Modus Operandi
By purportedly providing loans with no conditions attached, these platforms prey on the unmet demand for credit and target vulnerable borrowers. However, there is no redress for debtors, and they are subject to exorbitant terms and rates. You essentially give them access to everything on your phone with just one tap, including your full contact list, images, and videos. You will see money added to your account as soon as you complete out the form, including your Aadhaar, PAN, address, and the amount you require. Under the guise of providing a loan, the applications access all consumer phone information, which might potentially be utilised by the business to commit further financial crimes.
The mode of operation appears to be the registration of fictitious entities, the use of white labelled software to create apps, the uploading and use of wallets / UPI for carrying out the operations along with extraordinarily high interest rates (with GST which is a loot, as these are companies that do not exist in the GST database), social shaming, and the threat of using data obtained from phones using the app permissions in case of non-payment / delayed repayment.
The use of such an app or website by a customer may result in the collection of personally identifiable information (PII), financial information, and other sensitive information, which could then be used to compromise the user’s accounts, launch phishing attacks, and commit identity theft, according to an RBI panel.
These applications want the user’s PAN card, a photocopy of their Aadhar card, and a copy of their last three months’ worth of bank statements in order to grant a loan. Within minutes after getting the documentation, they grant a loan. Loans are occasionally provided even without this documentation. A hefty daily penalty of up to 50% of the loan amount can be charged by instant lending firms for not repaying the loan on time, in addition to yearly interest rates ranging from 36% to 50%. Add a 20–25% processing charge and 18% GST on top of that. Recovery agents then bully and intimidate customers into paying back the loan amount. The person’s WhatsApp number and those on his or her contact list receive vulgar messages, lewd images, and nasty texts.
How many such Apps Exist?
Only 33% of the 220 million Indians who qualify for loans from legitimate financial institutions have access to a bank account, and the remainders are ineligible for loans because they lack collateral or have a poor grasp of the loan application procedure. While several legitimate mobile lending applications, such Dhani, PayMe India, and IndiaLends, have developed to satisfy their demands, India has also seen an increase in fraudulent apps. According to data from the Reserve Bank of India, 27 such applications have already been removed by the government while 600 unlawful lending apps have been discovered. As of November 2021, Google Play had taken down over 205 of these applications.
A “Personal Loan App Declaration” form and supporting materials, such as a licence from the Reserve Bank of India (RBI) or evidence that the app is only a platform acting as a middleman for authorised non-banking financial companies (NBFCs) or banks, will be required of Indian lending apps starting in July 2021, according to Google. More than 500 instant-credit applications with Chinese origins that did not adhere to central bank regulations were even terminated by Google.
The excessive interest rates certain applications impose as well as the drawn-out loan recovery process were also issues that the RBI had received complaints about. The RBI warned the public in December 2020 not to fall for the duplicitous practises of unauthorised digital lending platforms and to check the credentials of the business or corporation providing such loans. Additionally, the RBI has advised state governments to monitor such applications through their local law enforcement organisations.
What can one do to safeguard themselves from such Scams?
The only option is to take out loans from reputable, approved platforms, middlemen, and lenders while keeping an eye out for the following warning signs: Use reputable, legitimate, and secure platforms to apply for credit instead of going straight to the bank or another non-banking financial institution. Verify the legitimacy of the company that is represented by the website or app you are utilising. Verify whether they have real locations and whether their website is safe. Never borrow money from a business or app that doesn’t request your credit history and puts pressure on you to finish the transaction right away. There is no fee associated with getting a loan approved by any organisation.
The processing fee is typically added to your loan bill or is payable straight to the bank when an NBFC offers you a loan. It is a warning sign if you are requested to pay cash or transfer funds to any personal accounts, or if you are asked to pay a portion of the loan upfront for processing.
Beware of Fraudulent Apps
The App Store and Play Store both have a large number of illegal software. Fortunately, they may be recognised by their numerous unfavourable reviews, poor download volume, and lack of a “confirmed” badge.