How Do Ordinary People in Pakistan Fall into the Trap of Digital Debt?

How do ordinary people in Pakistan fall into the trap of digital debt?

“I took a loan of Rs 27,000 from the online personal loan app and had to repay Rs 34,200 in 90 days, but six days later I got a call from the company that you have to repay the loan. The app was asked to repay the loan in 90 days, a discussion started with the recovery agent of the company and now the situation is that I am being abused by the recovery agent.

Atif’s son, a resident of Wazirabad in Punjab, had a leg operation. They desperately needed money. Before he could borrow money from friends or relatives, he saw an advertisement on social media for a lending company that was lending for ninety days.

Atif immediately applied for a loan and in a day and a half he got the money. Atif contacted the hospital for his son’s treatment and he gave some time for the operation. Exactly six days after taking the loan, he received a call on his mobile phone from an agent of the online lending company that the loan repayment date had expired.

Atif was shocked by the phone call and told the agent that he had to repay the loan in 90 days. The agent told them no, it’s time to pay off your debt and you have to pay it.

The agent said that if you are unable to repay the loan, you can deposit Rs. 6,600 to extend the loan repayment date. Atif told his wife. Both the husband and wife are worried about the treatment of the child and on the other hand this new trouble fell on their head. After doing this, Atif took Rs. 6600 from a friend and paid the extension money.

Ten days later, the recovery agent started calling again to pay off the debt. Atif said that he did not have any money and would deposit the money in 90 days but the agent asked him to pay the money, give extension money and extend it for another ten days or his relatives. Will be informed by phone.

Atif told BBC News that shortly after the end of the call from the agent, a call came from one or two of his relatives saying that he had heard that you had taken a loan and were not repaying it. Atif said he took out another loan, paid Rs. 6,600 and asked for an extension for another ten days.

Atif says that so far he has given Rs 13,200 to the company in the name of extension money and still has to repay the loan of Rs 34,200 and now he is being threatened by the agent and the matter has reached Galum Gluch.

Samar Elahi, a resident of Layyah district in Punjab, told BBC News that he could not sleep for the past two days because he had taken a loan from the Personal Loan App for three months to repay the loan and after ten days he took the loan. Payments are being made and threats are being made to inform their relatives.

Hassan Ali of Karachi also took a loan through an online app and on a 21,000 loan he got Rs 16,800 which was deducted in the name of commission and then he was also harassed by the company.

Atif, Samar Elahi and Hassan Ali are among the victims of taking personal loans through online apps who are seen complaining of ill-treatment by companies after taking loans.

There are hundreds of victims on social media who have shared their experiences of online personal loan apps threatening to draw money in the form of illegal repayments and non-payment.

While people are dissatisfied with the companies’ treatment of online lending apps, some say they borrowed from these online apps and paid back on time. He did not have any bitter experience in this regard.

Among such people is Obaid Saghir, a resident of Karachi, who says that he took a loan of Rs 15,000 and repaid it within the time given by the company.

What are online loan apps?

There are many online lending apps on social media that offer small loans to people. These digital lending companies are available on various social media platforms under different names and most of them provide loans ranging from Rs 10,000 to Rs 50,000. These companies run fast, easy, timely loan advertisements on social media offering loan facilities to aspiring borrowers in one to two days.

These online lending apps are among the most downloaded apps from the Play Store in Pakistan.

The Securities and Exchange Commission of Pakistan, a government agency, told BBC News in a written statement that some of the digital lending apps are linked to non-banking companies and are called SEs. Regulated by the CP and regularly licensed or licensed by the State Bank in this regard, however, many apps are operating without a license which is illegal because lending is a licensed process and Pakistani law prohibits private lending.

How do online loan apps trap people?

Sharq (pseudonym), who works as a recovery agent on an online app, told BBC News about how to get an online app loan and how the company deceives the borrower. He said that when a person applies for a loan on the online app, first of all he is not provided correct information by the company. The details of the loan value and repayment given in the app are just a hoax.

“Whether it’s a small loan or a large company, it starts paying off after seven days, when the app says it’s 90 days,” says Sharq. When a person applies for a loan, he thinks that he has to repay the loan for 90 days, but after receiving the loan, he realizes that it has to be repaid after seven days. In this case, if the borrower calls the helpline, she is always busy and there is no response from the customers.

“If the lenders are unable to repay the loan, it is charged in the name of extension money, which is extended by ten days a week to repay the loan,” Sharq said. If a person is unable to repay a loan, he is threatened and his relatives are told that he is suffering from mental illness.

Sharq said that he felt sorry for many people but the management of the company does not give any concession in this regard.

He says the biggest problem is that these small borrowers take out a loan under duress and rush to apply for a loan by simply reading the company’s app, or a lot of people read it. Do not hesitate and fall into the trap of these companies.

The SECP said it was monitoring the digital lending and borrowing process and was also looking at the underlying risk involved so that lenders and To keep users safe.

On the issue of intimidation of creditors by companies, the SECP said that lenders should be properly informed and all the terms and conditions of loan disbursement should be properly disclosed and in case of any complaint should contact the prudent company and If there is no solution from there, contact the SECP and register your complaint at https://sdms.secp.gov.pk/.

What’s the reason for the growing complaints in the digital loan app?

Ammar Khan, an investment and financial affairs expert, told BBC News that the normal banking system is closely monitored by the SBP in the wake of growing complaints against the digital lending app.

“Consumer financing is a regulated business around the world to protect the interests of the consumer,” he says. He said that digital lending apps are working all over the world but in Pakistan it has become a ‘lone shark’ due to lack of transparency.

He said there was no objection to such digital loan apps but their working methods should be monitored as they intimidate lenders and even harass their family members.

Ammar Khan said that these loans are often taken by poor people who urgently need money and do not know how to read and write properly. These apps often run ads for interest-free loans and these people are deceived. When they are harassed by a company for repaying a loan, they do not know which forum is where they can lodge their complaint or they are afraid of being intimidated by the company. Go

Ammar Khan said that as the SBP had issued a policy in 2009, customers who take loans from banks would not be intimidated and harassed. However, he said that the SECP did not seem to have the capacity to take any action.

The SECP said in a statement that it discourages lone sharks and urges borrowers to study all the conditions carefully before taking out a loan. Includes interest on the loan, service charges, penalties for late loan repayments, etc.

The SECP is also considering introducing additional rules and regulations in this regard, which will encourage better treatment of borrowers.

Are digital lending companies local or non-local?

Talking about the ownership of digital lending companies in Pakistan, Ammar Khan said that these companies include local as well as non-local companies.

He said that along with most of the local companies, management companies consisting of Chinese people are also working on the online platform in this regard.

On the other hand, online lending companies have been banned in China.

“The SECP should be asked whether data is being shared with China through these apps when there is a ban on digital lending apps in China,” says Ammar Khan.

Giving its position in this regard, the SECP said that under the rules and regulations of NBFC, ie non-banking finance companies, no such company has so far transferred the relevant records or documents of its business outside Pakistan. May it be until the Commission allows it.

The agency said that in order to deal with any potential threat, the SECP was considering further regulations under which any company could securely store the data of its customers or creditors within Pakistan.

On the ban on digital lending companies in China and its permission in Pakistan, the SCEP said lending is a legal process and the app can give access to loans to those who have access to loans from commercial banks. Is not accessible.

Source by BBC Urdu