The Competition Commission of Pakistan (CCP) has issued a warning to the public about the growing 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 they are currently facing numerous complaints and challenges in their track-and-trace process.
The CCP has initiated an inquiry into these applications, which are observed to constantly change their premises and/or companies/undertakings behind such applications. Until the conclusion of the inquiry, the CCP deems it necessary to alert the general public about the many issues observed and how to avoid these issues. The CCP has also informed SECP, FIA, and PTA about these concerns.
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 may tend to take complete control of the user’s device by requiring the user to agree to standard access permissions for the app. This may affect the privacy of the user and make them vulnerable to the operator of such applications. Therefore, users are cautioned to carefully read the terms and conditions displayed so that they can 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 collaterals/guarantors by the operators. Recovery agents have reportedly been known to harass and abuse borrowers and their contacts for the sake of repayment.
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.
The general public is advised by CCP to exercise caution and due diligence when using mobile app-based micro-credit and nano-loan facilities. As per the initial findings, these applications have well over 10 million downloads by the general public, most of whom are vulnerable consumers belonging to the lower to middle-income class.
