How Instant Lending Apps Are Debt Traps as Borrowers Decry Misuse of Private Data.
In a span of 1 hour after the expiry of an instant loan, Stephen Byaruhanga had transcended from a much-sought client to a most wanted defaulter-this time dead or alive for an action he entered into for rescue points.
Thousands of Ugandans who borrow from Instant Loan Apps have reported continued misuse of the personal information that they provide to lending companies when applying for small amounts of loan, they are calling for the intervention of their regulators especially on how the modalities of how to use their private information including phone contacts, emails, among other which they say is much humiliating than the intention of the loan.
Several people have approached media outlets as the last resort to address the grievances that the exposure has caused to them, their families, their workplaces, and the community.
In an interview with this website, the Kampala-based Public Relations Officer, said while online he received a pop-up with an advert from an instant loan app.
He said at first did not pay attention to it, but what caught his attention was the fact that he received a call from a brother from the village who needed some rescue points to clear his garden.
“The advert promised low interest and fast service to which I downloaded the app and filled in the personal details including my National Identification Number. After some hours a lady called me to confirm my order and I later received the first small loan. I paid it in time before the expiry date and I have prompted another pop-up message for a bigger loan to which I obliged being a good past customer. But it’s the second loan that has messed up my whole life and am in a financial debt hole” he narrated.
When applying for a loan online, there is an option requiring the applicant to allow access to their phone contacts, call logs, photos, and SMS among other things.
“By using our app and website or providing us your Personal Data, you will be treated as having given your permission for our collection, use, and processing of your Personal Data, and you have accepted the policies and practices described in this Privacy Notice. If you do not allow the collection, use, and processing of your Personal Data, kindly refrain from using our app and website, and/or contact us for any privacy-related concerns” their policy brief partly reads
Just on the expiry date at noon, Mr Stephen say that there were many messages saying the loan is overdue and liable for late interest fee. But before the message came he said he received a mammoth of calls from all the contacts in my phone book ranging from family members, friends, and customers, among other asking me to inform him on how some lenders have called them to remind me of the loan.
I tried to restrain them from the action but they insisted that they will continue until the loan.
“On the expiry, they kept calling constantly reminding me to repay. When you least expect them to call, the phone rings from the lender and also from phone contacts who get concerned to call demanding the money you borrowed from them” he said
“Will you repay your loan?” somebody will arrogantly shout at the other end of the call?” Stephen recalls when he called them and a gentleman told him that he is going to expose even false information to his contacts. “Am going to tell your people that you are gay, I even have your nudes. And the lady would in the background say am going to continue sending the messages” he said
A name-and-shame kind of blackmail game is common in virtual spaces these days, similar to what journalists believe in that “when someone gets ashamed of doing a bad thing, he will stop it and do the right thing”
“Overdue Repayment: If Borrower fails to pay the due amount before 24:00 of each due date, it shall be deemed as overdue. If the Borrower delays in each term, they shall pay the overdue penalty and late fee (the aforementioned amount shall be referred to as "overdue payment") in addition to the payable principal and interest. In case of any overdue payment, Borrower shall, in accordance with the provisions of paragraph 2 of this article, pay overdue penalty, interest, and principal, and any service fee paid by Borrower to Lender shall not be refunded.” The agreement reads in part.
As fate would have it, he felt he had indeed defaulted to the wrong kind of lenders. He is calling for assistance from relevant regulators and other lending apps to review their policies and agreements because instead of helping they are torture apps.
Uganda Communications Commission (UCC) describes the mobile lending apps that predatory lenders use as agile. The UCC executive director, Ms Irene Kaggwa-Sewankambo, likens the situation to when “loan sharks or money lenders first exploded in the financial scene” in the country.
Ms Kaggwa says after doing their homework, the people that the apps target should “always be cautious and should do due diligence before applying.
The UCC regulates the telecommunications services and infrastructure on which the predators literally hide in plain sight. The regulator works in tandem with the Central Bank provides technical advice and chips in with interventions when necessary to guarantee the security of the digital financial or fintech industry.
The Bank of Uganda (BoU) Director of Research Dr Adam Mugume, it became clear that the Central Bank can only do so much. Dr Mugume said: “Mobile lending apps are not under the category of BoU Supervised Financial Institutions.” This, therefore, means the Central Bank cannot sanction the predatory lenders using the apps to inconvenience or fleece the unsuspecting victim.
The National Payments Systems Act 2022 formalized the regulatory oversight of BoU over digital financial services like mobile money operating in the country. The Central Bank admits to being powerless when it comes to predatory lenders whose web of deceit could be transnational.
“Consumers should be advised to disassociate from unregulated financial service providers. Otherwise, when they face challenges, no regulatory institution would have the mandate to intervene on their behalf,” Mr Mugume warned, adding, “If consumers of financial services feel cheated by a financial services provider supervised by BoU, we have a customer complaint desk that handles such complaints.”
This website tried calling one of the app posing as an interested borrower, the lady on the other side of the call said the interest is between 3 and 10 percent depending on how much one wants to borrow. “When asked how much interest they will charge for the loan of Shs200,000, , her response was that she cannot tell, as she is only a customer care provider and it’s the accounts officer who computes that,”
The next artilce will name all loan apps that have turned into blackmailing machines for their clients.
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