Predatory Loan Apps in India Use Fake Ads on Google and Facebook to Lure Victims

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“I thought if this doesn’t stop, the next step for me will be suicide,” Nama Karan, 26, from Indore told Media. It all started when he installed an instant loan app in October 2020 after seeing an ad on Youtube. Faced with financial difficulties, Karan took out a loan of Rs. 3000 with a repayment period of 7 days through the app.

Within 4 days, the app’s customer managers started calling her, asking her to pay. Due to abusive interest rates, his repayment amount was Rs. 6000, and in order to pay it off, he decided to take out another loan from another app, for which he would have to repay Rs. 9000.

I was trapped in the cycle for two months, and eventually just to pay off my Rs. 3000 loan, I paid somewhere between Rs. 70,000 to 80,000 towards different loan applications. I sold my bike, my family’s gold, I was in a terrible situation. – Karan

Karan recalls that the Youtube ad painted a flowery picture – an instant loan for Rs. 50,000 and a term of 12 months, with a small amount of interest. When he opened the app, however, the actual loan term was 7 days and the loan amount approved was only Rs. 3000. While the advertising policies of Facebook and Google prohibit such loan applications. In advertising, many such ads have slipped under their radar amid the pandemic to target vulnerable Indians like Karan.

Digital ads are not regulated by the Indian government, and social media platforms have little incentive to deny ad revenue. Predatory loan apps in India benefit from this status quo, trapping gullible Indians with deceptive ads on popular social media platforms.

How serious is the problem of predatory loan applications in India?

Pugalyendhi Gautham is a very busy man at SaveThem India, a foundation established in March 2020 to tackle the problem of loan applications in India. Currently, he works regularly with 1,300 victims, including about thirty, he spoke of suicide *.

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SaveThem India has, in its 16 months of existence, received more than 55,000 calls from victims of harassment from loan applications. Here are some of the common harassment techniques used by loan apps to collect money, documented by SaveThem India in screenshots and recordings viewed by MediaNama:

  • Night calls: Loan apps use automated calling software to harass victims late at night and interfere with their daily lives.

    Calls from a debt collector made between 3 a.m. and 6 a.m. Source: SaveThem India

  • Threats to notify contacts: If the borrower defaults, loan app agents threaten to call the borrower’s contacts or create WhatsApp groups to announce their non-payment. In some of the screenshots viewed by MediaNama, such groups were created and images were shown with “420” or “fraud” written on the photos of the victims.

    Debt collector threatens to create Whatsapp group of borrower contacts. Source: SaveThem India

  • False legal opinions: The apps threaten to take legal action against borrowers and send fake legal notices with electronic stamps showing stamp duty paid under a government-registered case.

    False legal notice sent to a borrower. Source: SaveThem India

Predatory loan apps that harass victims are still readily available on the Play Store. Google is introducing new policies for India to filter these apps from the Play Store this month, MediaNama reported earlier. This, however, is only one piece of the puzzle. Loan apps are less and less focused on the Play Store for exposure, relying instead on alternative channels like texting and social media advertising.

Loan apps use Google and Facebook ad platforms to serve deceptive or bogus ads

To attract unsuspecting borrowers, predatory lending apps advertise on popular social media platforms like Youtube, Facebook, and Instagram. Ads for these apps have even appeared on apps like Truecaller and Zomato (thanks to integrations with Facebook Audience Network and Google Ads).

Loan apps that advertise on social media often deliver misleading or outright bogus ads. Here are some ways in which these banner ads convey deceptive content:

  • media personalities; Some advertisements seen by MediaNama and broadcast on Youtube include photos of well-known figures like Shah Rukh Khan, Akshay Kumar, Sudhir Choudhary and even Prime Minister Narendra Modi.

    Lending app uses Modi’s image for YouTube ad

  • Bank logos: The advertisements on Facebook, Youtube and Instagram seen by MediaNama use the logos of trusted banks such as Union Bank of India, IDBI Bank, ICICI Bank and SBI. Logos of trusted payment apps like Google Pay, PayTM, and PhonePe have also been used on banner ads to attract unsuspecting borrowers.

    Loan app abuses bank logos on Youtube ad

  • Misleading interest rates: According to Gautham, distorting interest rates is a standard trick loan apps use to trick borrowers. Advertisements will advertise deceptive interest rates, and borrowers will not find out the real interest rates until it is too late.

    CashBus India abuses the IDBI Bank logo and advertises an effective interest rate of 0.25% over 12 months on an Instagram ad.

How does Google allow such ads to target Indians?

As a result of the dominance of Google and Facebook in the digital marketing space, most advertisements, whether on Instagram, Youtube or Zomato, are governed by their advertising policies. Both companies have specific policies to prevent such ads:

Google advertising policy: Google’s advertising policy contains several clauses under which such ads should not be allowed, including specific policies for personal loan applications:

  • Counterfeit goods: In accordance with Google’s advertising policy, any advertisement promoting a counterfeit product that improperly uses a trademark or logo is prohibited On the platform.
  • False declaration : Google’s advertising policy also states that the company does not allow advertisements that deceive users by providing misleading information.
  • Minimum and maximum repayment period: Personal loan applications must indicate the minimum and maximum repayment term on the destination site of their advertisement.
  • Annual percentage rate: The loan service must include the annual interest rate plus fees and other costs for one year on its landing page.
  • Total cost of the loan: According to Google’s advertising policy, loan applications must also provide an example showing the total cost of the loan, including all applicable fees.
  • Short-term loan: Loans that require repayment in less than 60 days are not allowed to advertise through Google ads

Although the advertising policies are comprehensive, most of the advertisements viewed by MediaNama and displayed on Youtube and the Play Store violated at least one, if not more, of these policies.

In a statement responding to questions sent by MediaNama, a Google spokesperson pointed out the new Advertiser Identity Verification Program, under which advertisers on Google will be required to submit their legal name and proof of identity:

In 2020, our policy and enforcement investments blocked or removed approximately 3.1 billion ads for violating our policies and restricted an additional 6.4 billion ads. – Google spokesperson

What are Facebook’s policies regarding harmful ads for predatory lending apps?

Facebook Advertising Policy: Facebook has specified in its advertising policies that the review process relies on automated tools to find a violation. Here are the Facebook ad policies relevant to loaner app ads:

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  • Payday loans: Short-term loans (less than 90 days) to cover expenses until payday are not allowed on Facebook’s advertising network.
  • Misleading claims: Advertisements must not contain misleading or false claims about the effectiveness or characteristics of any product or service.
  • Unacceptable business practices: Advertisements should not promote products intended to defraud people for money or personal information.

Personal loan apps running on Facebook and Instagram, seen by MediaNama, used the IDBI Bank and Union Bank of India logos, clearly violating the policy’s “misleading claims” clause. Several ads also advertise loan applications with a repayment period of less than 90 days.

In response to questions sent by MediaNama, a Facebook spokesperson said:

Examining the ads of millions of advertisers around the world against our advertising rules is essential, but it is not without challenges. Our app is not perfect, and machines and people make mistakes. We also have reports so people can let us know if they think an ad is breaking our rules. – Facebook spokesperson

What have Google and Facebook done so far against harmful advertising?

  • Advertiser Identity Program: In 2020, Google launched the Advertiser Identity Program, requiring advertisers to verify their legal name using authorized documents, a Google spokesperson told us via email.
  • Fewer ads for alcohol and gambling: In December 2020, Google introduced an option in Ads settings where users can limit their exposure to gambling and alcohol ads.
  • Agreement with advertisers on online nuisance: Facebook, YouTube and Twitter reached an agreement with their largest advertisers on harmful online content in September 2020. The companies have agreed to adopt a common framework to define harmful content inappropriate for advertising.
  • No targeting for US credit card ads: After the reaction of civil rights groups, Facebook decided to remove ad targeting by age, gender, and zip code for real estate, employment, and credit card listings in the United States.

* Disclaimer: If you or someone you know is having thoughts of suicide, please call one of the helplines listed here or contact a mental health professional.

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