The government has blacklisted 111 unauthorised social media apps offering interest-based loans, it has emerged.
The announcement came on Monday from Caretaker Interior Minister Sarfraz Bugti, who said the Federal Investigation Agency (FIA) has confiscated Rs1.8 billion worth of interest.
The FIA has also registered cases against individuals running social media apps apps that offer loans online.
The development arrives amid mounting concerns surrounding online lending platforms that are not registered with the Securities and Exchange Commission of Pakistan (SECP) and deploy exploitative practices.
Recently, the apps came under intense regulatory scrutiny for offering people in need easy loans with a nominal interest but increasing it to a hefty amount later, maliciously trapping the borrowers.
The blackmail tactics deployed by the owners of online loan platforms alerted the authorities. In July, the Pakistan Telecommunication Authority (PTA) blocked 43 lending apps after a man in Rawalpindi ended his life over his failure to repay the loan with heavy interest.
All of the banned apps had been operating without a licence, according to the Ministry of Information Technology and Telecommunication (MoITT).
The ministry had also released awareness posts on social media, warning unsuspecting potential borrowers about the predatory lending practices on the internet. Users were warned not to be lured by the advertisements for fraud loan apps and share their personal information with online lenders.
Following the suicide incident, the FIA launched a number of operations against illegal loan companies. The authority arrested 17 suspects and blocked around 30 accounts across the country.
While such personal loan apps are often advertised as safe and convenient, they come with various exploitative and heavy interest charges, usually hidden. When the borrower fails to repay the loan, the lenders begin to blackmail and harass them, threatening them with exposure to their family and relatives.
In most cases, the lenders have previously obtained the contact list of the borrower at the time of arranging the payment, which they go on to use for blackmail purposes.
Earlier in April, Google imposed stricter regulations on online lenders in Pakistan. The company barred loan companies from accessing the borrower’s personal information on their device, including contacts and photos.
Google said it would not allow apps that exposed users to deceptive and harmful financial products via its app store, Google Play.
Authorised online finance apps are registered with the Securities and Exchange Commission of Pakistan (SECP). It is, therefore, advisable to check whether the company holds a valid licence on the SECP website.
