CCP Issues Guidelines on How to Avoid Fraud When Using Loan Apps

The Competition Commission of Pakistan (CCP) has issued a public warning and caution about the growing trend of mobile app-based micro-credit and nano-loan facilities.

These applications, which are available on Google Play and AppStore, provide borrowers with short-term financing but are currently facing numerous complaints and challenges in their track-and-trace process.

The CCP has launched an investigation into these applications, which have been observed to frequently change their premises and/or the companies/undertakings behind such applications. Until the investigation is completed, the CCP believes it is necessary to inform the general public about the numerous issues discovered and how to avoid them. CCP has also informed SECP, FIA, and PTA about this.

The majority of these applications operate in violation of Pakistan’s regulatory framework. As a result, it is critical to ensure that the applications from which consumers borrow are properly registered and operate within a regulatory framework.

Furthermore, by requiring the user to agree to standard access permissions for the app, these applications may take complete control of the user’s device. This may compromise the user’s privacy and make the user vulnerable to the operator of such applications. As a result, users are advised to carefully read the terms and conditions displayed in order to make an informed decision.

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Users are presented with various terms and conditions when applying for a loan through these mobile app-based micro-credit and nano-loan facilities, which 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, these terms and conditions are frequently at odds with what is advertised, resulting in deception or fraud.

The applications also require the user to enter two or more emergency contacts, who the operators consider collaterals/guarantors. For the sake of repayment, recovery agents have reportedly been known to harass and abuse borrowers and their contacts.

The general public is made aware that when the loan matures, these lenders will contact the consumer as well as the emergency contacts to recover the loan.

To avoid falling victim to fraudulent activities, the public should be aware that there have been instances where recovery agents have provided their personal account details rather than the lender’s valid account.

As a result, payments may not be adjusted against the repayment, causing additional inconvenience to borrowers. Customers must exercise caution and only make payments on the registered accounts of mobile app-based micro-credit and nano-loan facilities.

CCP strongly advises the public to use mobile app-based micro-credit and nano-loan facilities with caution and due diligence. According to preliminary findings, these applications have received well over 10 million downloads from the general public, most of whom are low- to middle-income consumers.