You might have heard about or seen online ads for online loan apps. Beware! This is a debt trap that is driving people to commit suicide in many cases.
Researchers from Lookout Threat Lab recently discovered approximately 300 online loan apps on Google Play and the Apple App Store that engage in predatory practices.
These apps excessively collect user data from mobile devices and harass borrowers to repay their loans. Several loan operators have been found engaging in deceptive practices.
Users have reported hidden fees, high-interest rates, and unfavorable repayment terms. Evidence suggests that the collected user data is sometimes used to pressure borrowers into repayment, leading to harassment of customers and their contacts.
How Do Predatory Loan Apps Work?
The User downloads the app from Google Play or the App Store and is asked to provide personal information like their name, address, employment history, education, and banking details.
Aside from the information users provide willingly, the apps also request permission to access call logs, text messages, installed apps, photos, and contact lists. The apps will only let users continue if the required data is provided.
Many of the apps immediately start collecting contact information after receiving permission. On Android devices, some apps also collect SMS messages. Scam operators use contacts, phone history, and SMS messages to publicly embarrass and pressure victims into repaying.
Victims of these loan apps receive some money they apply for but encounter severe penalties. A significant part, up to one-third, of the borrowed amount is taken as fees before giving out the loan.
Subsequently, extremely high interest rates are applied, and the victims are pushed to repay within a brief timeframe, often just a few days.
Now the Harassment Begins!
After the app collects the victim’s information and distributes the loan, the collector starts harassing the borrower. Sometimes they wait until the payment deadline has passed, but many complaints show that harassment happens even before the due date.
The collector contacts not only the borrower but also people not mentioned in the loan application, such as family and friends. They threaten to reveal the borrower’s debt or personal information to these contacts.
How to Keep Safe from Predatory Online Loan Apps
1. Research and choose reputable loan apps: Conduct thorough research before downloading any loan app. Read user reviews and check if the app is legitimate and well-known.
2. Be cautious with personal information: Be wary of loan apps that ask for excessive personal information. Only provide necessary details and avoid sharing sensitive data like social security numbers or passwords.
3. Verify app permissions: Pay attention to the permissions the app requests during installation. If an app asks for unnecessary access to personal data or features on your device, reconsider using it.
4. Read terms and conditions: Take the time to read the terms and conditions of the loan app. Look out for any suspicious or unfair practices mentioned in the document.
5. Check licensing and regulation: Verify if the loan app is licensed and regulated by relevant financial authorities. Legitimate apps usually provide information about their licensing and compliance with laws.
6. Read reviews and feedback: Read reviews and feedback from other users before using a loan app. If there are many complaints about hidden fees, unfair terms, or harassment, it’s best to avoid that app. 7. Report suspicious apps: If you encounter a loan app exhibiting predatory behavior or engaging in fraudulent activities, report it to the appropriate authorities or consumer protection agencies.