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India’s Home Ministry cracks down on predatory lending apps following suicides

India’s Home Ministry has asked state governments to crack down on illegal lending apps it says have led to “multiple suicides by citizens owing to harassment, blackmail, and harsh recovery methods.”

A letter sent last week states: “Large numbers of complaints have been reported across India pertaining to illegal digital lending apps that provide short-term loans or micro credits at exorbitant interest rates with processing or hidden charges, especially to vulnerable and low-income people and use the borrower’s confidential personal data like contacts, location, photos/videos for blackmail/harassment.”

The letter does not mention China, but numerous reports in Indian outlets have linked the letter to past allegations of rip-offs run by China-controlled apps.

Whatever the source of the apps, the practices of their operators are nasty.

The letter alleges they find customers with mass messaging campaigns plus activities in app stores, and when they find a victim require them to submit contacts, location, and access to storage on their smartphones. Armed with that info and access, the apps’ operators “blackmail the citizens using morphed images and other abusive practices by recovery agents located in India as well as overseas.”

The letter further indicates that “It has been learnt that this is an organized crime” and supports that characterization by the perpetrators’ use of money mules, disposable email accounts, shell companies, payment aggregators, and other means to cover their tracks.

The crooks behind the apps use cryptocurrency to cover their tracks, too, allegedly.

The letter therefore recommends state governments create investigative teams that possess the skill of tracing cryptocurrency transactions, loan app analysis, and malware analysis.

India’s Cyber Crime Coordination Centre and National Cyber Crime Forensic Laboratory are available to assist with those efforts.

The letter points out that the apps and their operators are unregulated by India’s Reserve Bank – an issue authorities are aware of as they’ve recently called for regulation to control which financial services apps are permitted into the digital bazaars.

The government has also recently tabled legislation that will require providers of over-the-top communications apps to be put on similar regulatory footings to licensed carriers. It has also banned hundreds of Chinese apps on grounds that they funnel citizens’ data across borders without permission and/or in ways that endanger Indian residents’ privacy.

The Ministry’s letter suggests those bans could perhaps usefully be revisited. ®