Online Loan App Scams Are on the Rise: What the Law Can—and Can’t—Do About It

In today’s fast-paced world, instant credit is just a few clicks away. Online lending apps promise quick loans—no paperwork, no collateral, no questions asked. Sounds perfect, right? But that ease comes with a dark side. Across India, an increasing number of people are falling prey to shady loan apps that are anything but beneficial.

So, What Exactly Are These Scams?

Many of these apps aren’t even registered with the RBI. They offer small loans with hidden fees and sketchy terms. If you delay a payment or can’t repay on time, the nightmare starts:

Ridiculously high interest rates and surprise charges

Threats and abusive messages

They snoop through your phone, accessing contacts and photos

Public shaming via WhatsApp or social media

These apps exploit fear and emotional pressure to coerce repayments, capitalising on weak laws and privacy loopholes.

This Problem Is Only Getting Bigger

Here’s what the data says:

In the last two years, over 100 illegal loan apps have been flagged by the government

Victims include students, homemakers, gig workers, and salaried employees

In some states like Andhra Pradesh, Maharashtra, and Telangana, suicides have been linked to this kind of harassment

What Laws Exist (and Where They Fall Short)

Some Laws That Can Help:

RBI Act, 1934 – Only RBI-registered lenders are allowed to give loans legally

IT Act, 2000 – Covers digital privacy and obscene content

IPC Sections:

384 – Extortion

506 – Criminal intimidation

509 – Outraging modesty

DPDP Act, 2023 – New rules to protect your data

TRAI Rules – Some control over spam calls

But There Are Gaps

Even with these laws, victims often fail to receive justice. Here’s why:

Most people don’t know their digital rights

Many of these apps are run from outside India, making them hard to track

There’s no single place to report all fintech-related issues\

Police often refuse to file complaints or take an excessive amount of time to do so.

App stores don’t do enough to check these apps before listing them

What You Can Do If You’re a Victim

Steps to Take Right Away:

File a complaint at cybercrime.gov.in

Report the app on RBI’s Sachet portal: sachet.rbi.org.in

Tell Google Play Store or Apple Store to take the app down

If your data was misused, complain to the Data Protection Board

Call the National Consumer Helpline at 1800-11-4000

What Needs to Change

India needs to step up with:

Stricter rules for digital lending by the RBI and Meity

Quick-response cyber tribunals for faster justice

Google and Apple should do real checks before listing finance apps

Campaigns to help people borrow safely and smartly

Stronger privacy rules so apps can’t access your contacts and photos without real consent

Wrapping It Up

These scams demonstrate that technology alone isn’t enough—we also need robust protection. Until the legal system catches up, people will continue to fall into these traps. Digital progress shouldn’t come at the cost of our privacy, dignity, or peace of mind.

By Dr. Payal Arya Sah

Published: 19 April 2025