Consumers warned of app-based micro-credit risks

CCP initiates inquiry against nano-loan facility providers

The Competition Commission of Pakistan (CCP) warns and cautions the general public about the rising trend of mobile app-based micro-credit and nano-loan facilities.

These applications, available on Google PlayStore and AppStore, offer short-term financing to borrowers but are currently facing numerous complaints and challenges in their track-and-trace process.

As a result, the CCP has initiated an inquiry against these applications, which are observed to constantly change their premises and/or companies/undertakings behind such applications.

Until the conclusion of the enquiry, 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 intimated 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 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 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 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 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.

The general public is 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, the public needs to be aware that there have been instances where recovery agents have given their personal account details instead of the lender's valid account.

Published in The Express Tribune, March 31^st, 2023.