CCP warns consumers of risks associated with mobile app-based micro-loan facilities

Consumers need to be careful and only make payments on the registered accounts

Islamabad: The Competition Commission of Pakistan (CCP) has warned and cautioned the general public about the rising trend of mobile app-based micro-credit and nano-loan facilities. These applications, which are available on Google PlayStore and AppStore, offer short-term financing to borrowers, but are facing numerous complaints and challenges in their track-and-trace processes.

As a result, the CCP initiated an inquiry against these applications, which were observed to constantly change their premises and/or companies/undertakings behind such applications. Therefore, the CCP deemed it necessary to alert the general public about the many issues observed and how to avoid these issues. CCP also intimated to SECP, FIA, and PTA in this regard.

Most of these applications operate without complying with Pakistan’s regulatory framework. Therefore, it is important to ensure that the applications from which consumers are borrowing are duly registered and are operating under a regulatory regime.

Moreover, these applications tend to take complete control of the user’s device by requiring the user to agree to standard access permissions for the app. This could affect the privacy of the user as well as make the user vulnerable to the operator of such applications. Therefore, users are cautioned to carefully read the terms and conditions displayed so that they could make an informed decision.

When applying for a loan through these mobile app-based micro-credit and nano-loan facilities, users are presented with various terms and conditions that outline the time period for which the loan is extended, the exact amount of loan disbursed, deductions made from the total loan requested, payment and repayment methods, and any hidden charges. 

However, it has been observed that these terms and conditions are often at variance with what is advertised, resulting in deception or fraud.

The applications also require the user to fill in two or more emergency contacts, which are considered as collaterals/guarantors by the operators. Recovery agents have reportedly been known to harass and abuse borrowers and their contacts for the sake of repayment. The general public is being made aware that these lenders will, on maturity, make calls to the consumer as well as the emergency contacts for recovery of the loan.

To avoid falling prey to fraudulent activities, it is important for the public to be aware that there have been instances where recovery agents have given their personal account details instead of the lender’s valid account. This can result in payments not being adjusted against the repayment and cause further inconvenience to borrowers. Consumers need to be careful and only make payments on the registered accounts of the mobile app-based micro-credit and nano-loan facilities.

CCP strongly advised the public to exercise caution and due diligence when using mobile app-based micro-credit and nano-loan facilities. As per the initial findings, these applications had well over 10 million downloads by the general public, mostly vulnerable consumers belonging to the lower to middle-income class.

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