When Sohail Shaikh, a 22-year-old Zepto employee in need of some money recently, a “Magicloan” ad on YouTube for an instant micro-loan popped into his mind. On April 24, he took a loan of Rs 6,000 from two apps “MagicLoan” and “Cashmarket”.
“I had to pay them back on April 30. I will get my salary on May 1, so I thought I would return it a day later. Their (loan apps) people, however, started calling me on April 29. I told them about the payment deadline but it didn’t matter – they were abusive,” said Shaikh Indian Express,
However, his exams had just started. “A day later, some of my colleagues and relatives called me and said that they had found a picture of my wife with obscene things written on it. I wondered how they could get his photo and his number. And then I realized that they have access to all my phone data. I had to explain to everyone that I had taken a small loan and these people were agents of the loan. It was painful,” he said.
An FIR was lodged by a 24-year-old woman from Charkop, Mumbai on April 14. FIR Kandivali (West) police station alleged that cyber fraudsters called her from 25 different mobile numbers and threatened to defame her if she never took the loan, and forced her to pay Rs 4.50 lakh . They also sent obscene messages about her to many people in her contact list including her family members and friends. Her cousin also received a WhatsApp message in which her number and photo were tagged as a sex worker.
“Those 15-20 days were the worst days of my life. The police asked me to switch off my phone but the fraudsters sent obscene messages to 150 people on my contact list, mostly family members. They only made WhatsApp calls. When my uncle tried to call him a general, an old lady from Karnataka took him. They were using his number for their WhatsApp,” she said.
Mumbai Police has registered 47 loan app fraud cases during March-April, out of which it has been able to solve only 1 case. It had registered 42 such cases during the entire previous year, out of which 5 were resolved.
While loan app scams have been reported from across the country, there have been cases in Maharashtra and Telangana in which victims were induced to commit suicide. At least 8 such victims have committed suicide in Telangana in the last one and a half years.
The modus operandi of these scammers has been that they offer “hassle-free” micro-loans through online apps, which do not check a borrower’s creditworthiness or ask for any documents while transferring money to his account immediately. It is this “no questions asked” approach of these apps as compared to traditional lending institutions that demand rigorous verification and background checks that has made them popular among the masses.
His popularity grew especially during the COVID pandemic, when many people lost their livelihood and were in dire need of money to meet their day to day expenses. However, according to several police officers and cyber experts, those taking loans through these apps now include corporate employees looking for extra money at the end of a month or youths in need of money to buy virtual currency.
Cyber expert Ritesh Bhatia said that since the demand for micro credit has reduced now, there have been many cases where these operators have demanded money from people even though they have downloaded their app. “In some cases, if you have taken a loan once, they will move the loan from another app to another. Also, many times they ask for money after you download the app, because now they have access to your contacts. The app is developed in such a way that once you download it, it gives loan companies full access to phone data. It doesn’t matter if you haven’t taken a loan from the app,” Bhatia said.
Many people who are lured by easy credit availability do not know or fail to check, that is the fraud related to interest rates and recovery mechanism. Bhatia said that in some cases, when people read the interest rate on their loans as 0.8%, they miss that it is a daily rate. “There have been cases where people have paid interest up to 66%.”
A Mumbai Cyber Police official said that GST is also deducted from the loan amount. “And within a week, you start getting calls demanding repayment of these loans,” he said. This is where the harassment of victims begins as recovery agents enter the scene.
An official said that when people install these apps on their phones, they usually do not realize that they are also giving them access to their phone data. “Hence, when the individual is not able to make the payment, the recovery agents have access to their number of family members, relatives, colleagues and friends. They call him claiming that he was appointed as the loan guarantor. This is to put pressure on them to ensure that the borrower pays. ,
However, Bhatia said some recovery agents have now resorted to “dirty tricks”. They use nude photographs or obscene clips to morph the picture of the borrower and then send it to the victim’s family members, relatives and friends.
It was a suspicious operation that allegedly forced Sandeep Koregaonkar, 38, a Malad-based counterfeit jewelery dealer, to commit suicide on May 4 after he found that his morphed photographs were sent to his loved ones, police said. he said. His family said that he has not taken any loan and only downloaded the apps.
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It was Koregaonkar’s suicide that forced the Mumbai Police to wake up to the serious harassment involved in these cases. Its initial investigation led them to a few call centers linked to such apps operating primarily from Delhi and Noida to other locations across the country.
In another recent case of sexual harassment by Andheri Railway Police, 170 calls were made to a Dombivli victim. When she could not pay the loan, her morphed video was sent on WhatsApp to her cousin, who then contacted the police. A 19-year-old man was picked up from Karnataka because his phone was used to send this obscene material. The police later learned that fraudsters had used his number to activate their WhatsApp and that the loan app, owned by two merchants from Kerala, accessed its database of borrowers to recover loans for a commission in Delhi. Outsourced to a call center located at
The police have also found that some of these micro loan apps are “Chinese loan apps developed by Chinese citizens”. A cyber police official said that as such cases were uncovered across the country, it was found that the accused used to collect money from the victims, convert it into cryptocurrency and send it to China.
In many cases, victims take money from one loan app to save themselves from harassment from another app. In a case going on in Mumbai’s BKC Cyber Police Station, a senior company official took a total loan of Rs 1 lakh from 10 apps. Within a few days, he received 80 calls from Delhi, Noida and other places in states like Meghalaya and Andhra Pradesh. In her case also, the fraudsters sent her obscene videos and threatened to defame her, forcing her to pay up to Rs 12 lakh.
What has made the police investigation all the more challenging is that in most of these cases the scammers have “carefully” to cover their tracks. In the case of a senior company executive, when the police tried to trace the account where he was asked to make the payment, they found it to be of another borrower.
Srinath Sreedharan, an independent director of the Fintech Association for Consumer Empowerment (FACE), said it is “very difficult” for common people to differentiate between a genuine RBI-affiliated loan app and a fraudulent one. “RBI has made the rules so complicated that it is confusing to differentiate between authorized and unauthorized apps,” he said.
Sreedharan, in its 2021 report, said the RBI’s working group on digital lending had made several recommendations to curb this menace, which were not implemented. “The only solution is that RBI does digital supervision of NBFCs to ensure that none of them are involved in lending through these unauthorized apps,” he said.
Recently, with the increase in such frauds, Google Came out with more stringent guidelines (see box) allowing only loan apps on its Play Store that are registered with the RBI. However, Bhatia said it would not make much difference as the accused would create apps and put links on their websites and send them to their victims’ WhatsApp or Telegram accounts for download. Police as well as cyber experts stressed the need to increase public awareness against such suspicious loan apps.