Lending Apps in India Shame Borrowers Who Can’t Pay Money Back

HYDERABAD, India – The harassing calls started shortly after sunrise. Kiran Kumar stayed in bed thinking for hours about how he would end his hostage of a lifetime.

The cement seller initially borrowed about $ 40 from a lender through an online app to top up his $ 200 monthly salary. But he couldn’t pay the assembly fees and interest, so he borrowed from others. By that morning, Mr. Kumar owed about $ 4,000.

Worse, the lenders had the phone numbers of those closest to him and threatened to make his problems public.

“If I am classified as a fraud in front of everyone, my self-esteem is gone, my honor is gone,” said 28-year-old Kumar in an interview. “What’s left?”

The Indian authorities are increasingly concerned that there might be many more victims like Mr Kumar out there. They believe a new generation of lenders, whose tech has been honed in China, hunted down workers and rural populations devastated by the impact of the coronavirus on the Indian economy.

These lenders do not require credit scores or visits to a bank. However, they raise high costs within a short time. They also require access to a borrower’s phone to suck up contacts, photos, text messages, and even battery percentage.

Then they bombard borrowers and their social circles with requests, threats and sometimes forged legal documents that threaten dire consequences for non-payment. In conservative, close-knit communities, such a loss of honor can be devastating.

A police investigation in the city of Hyderabad alone planned around 14 million transactions valued at 3 billion US dollars nationwide over a period of six months. The Indian Central Bank and the national authorities are currently investigating.

“It will be difficult for us to count the zeros,” said Avinash Mohanty, the joint police commissioner in Hyderabad. Police attribute five suicides in the city to the lenders.

According to the Indian government, around 100 credit apps have been removed from the Google platform. A Google spokesperson said it checked hundreds of loan apps and removed those that violated its rules.

The investigation raises alarms in India over the vulnerability of a population of 1.3 billion people who are still getting used to digital payments. According to PwC, the consulting firm, online transactions in India will reach more than $ 3 trillion by 2025. Further fraud findings could lead the government, which has already restricted the personal data online businesses can use, to take a firmer grip on the industry.

The apps also speak for the global nature of online fraud. Many of the companies use techniques that flourished in China two years ago before the authorities there shut them down, and which have since resurfaced elsewhere.

The loan apps came about at a desperate time. The government issued a tough two-month lockdown a year ago to contain the virus, plunging India into deep recession. Millions have been made unemployed. Traditional forms of lending such as banks and micro-lenders have been temporarily closed.

Updated

March 26, 2021 at 12:43 am ET

With names like Money Now, First Cash, Super Cash and Cool Cash – according to police documents – the apps came and went in the Google App Store in India, some reappearing with a slight change in identity. Most were created using off-the-shelf software that made it as easy to create as starting a blog, said Srikanth Lakshmanan, one of the coordinators of Cashless Consumers, a collective of technology volunteers who have studied the apps.

With a few taps on the phone and a fresh selfie, a borrower could get the money they needed for a doctor’s appointment, refilling the kitchen, or paying a child’s school fees.

The repayment can be made after a week. Lenders often added interest and fees of up to a third of the loan even before sending the money, leaving borrowers to owe more than they received. And in order to get money, the borrowers had to share their personal information.

At this point, according to police and analysts, the call centers went into action. First, they would get the borrowers to repay the principal, interest, and fees. Then they called friends and family, sometimes falsely saying that the borrower was wanted by the police. Some created WhatsApp groups, added members from the borrower’s contact list, and then bombarded the group with allegations. Some would direct desperate borrowers to other money-lending services and further entangle them.

The police in Hyderabad took note of this last winter after the suicides and after the people filed harassment complaints. They were blocked until an informant came forward and, in return for a reward of around $ 150, provided the address and details of a call center where a close friend worked as a debt collection agency.

In an interview with the New York Times, the debt collection agency – a quick-talking 24-year-old who was making about $ 130 a month – said he received electronic files on about 50 borrowers every day. The files contained her personal information, copies of her government IDs, and her contact lists.

Workers could earn a weekly bonus of around $ 7 if they pressured three-quarters of borrowers to repay loans, said the debt collection agency, which asked for anonymity fearing reprisals from its former employer. The bonus doubled with a success rate of four fifths or more. Customers often begged for time, the agent said, and some even said the constant harassment would lead to their deaths. The debt collection agency that had the bonus in mind would continue anyway.

So far, the Hyderabad investigation has led to raids on call centers in at least four Indian cities, with each center employing between 100 and 600 people.

Some of the companies have ties to China. At least four Chinese nationals have been arrested so far, the police said. In reverse engineering the most exploitative apps, activists like Mr. Lakshmanan found that large numbers were hosted on Chinese cloud services and used Chinese software development kits and facial recognition tools.

The police have so far frozen bank accounts of around $ 40 million. However, the path often leads to shell companies, money laundering networks or cryptocurrencies that are difficult for governments to trace.

Nonetheless, the advertising in Hyderabad has sparked a public backlash.

Mr. Kumar, the cement salesman, is now part of an online advocacy group. About 60 victims have joined the WhatsApp channel developing responses to harassing calls that will continue or provide support.

What Mr. Kumar saved on the morning of last summer, when he was in bed thinking about ending his life, was one last phone call to a friend. Realizing the urgency, the friend rushed into the room, and within hours helped collect the $ 400 Mr. Kumar had to pay that day to ease the nuisance.

“If it wasn’t for my boyfriend, I would be 90 percent sure that I would commit suicide that day,” said Mr. Kumar. “I still get calls. But now I’m telling them, “Do whatever you can.” I am not worried now. I feel protected. “

But for some families, neither the pain nor the harassment has gone away.

G. Chandra-Mohan, a 38-year-old father of three who worked in a clothing warehouse, took out approximately $ 1,000 in loans. After interest, fees and penalties, as well as borrowing from other service providers to stay afloat, his balance was five times as high. With a salary of $ 200 a month and the $ 80 a month his wife Sarita earned from a part-time job in a lab, he couldn’t pay it back.

Mr Chandra-Mohan has taken full advantage of his credit cards and pulled them off dozens of credit apps, his family said. When he complained to the police about the harassment, they told him to turn off his phone for a few days and come back if it continues, said his father-in-law, M. Sailu. Police said he may have called a cybercrime hotline but they did not record that he visited a police station.

One morning after Mr. Chandra-Mohan drove his wife to their office on the back of his motorcycle, he gave his three young daughters some change and sent them to their grandparents’ house around the corner. Then he hanged himself from a fan.

“Even after his suicide,” said his wife, “the phone keeps ringing.”

If you are thinking of suicide, call the US National Suicide Prevention Lifeline at 1-800-273-8255 (TALK). In India, contact 91-9820466726 or visit the Aasra.info website for more resources.

Cao Li contributed to the coverage from Hong Kong.

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