The Enforcement Directorate (ED) has frozen Rs 9.82 crores of Chinese-controlled loan apps parked in merchant IDs with payment gateways companies.
This is the latest action by the ED against such loan apps, which are accused of indulging in predatory lending. It is a part of an ongoing money laundering investigation against a "Chinese-controlled" investment token app.
"Various Chinese-controlled entities like Comein Network Technology Private Limited and others, in service agreements with various NBFCs [non banking financial companies] were also operating multiple suspicious loan/other apps such as Cashhome, Cashmart, Easyloan etc. and they indulge in receiving funds from public on pretext of operating these apps," said ED in a statement.
The app-based token under investigation in this case is HPZ and the entities whose funds have been frozen under the anti-money laundering law are:
1) Comein Network Technology Private Ltd, 2) Mobicred Technology Private Ltd, 3) Magic Data Technology Private Ltd, 4) Baitu Technology Private Ltd, Aliyeye Network, 5) Technology India Pvt Ltd, 6) Wecash Technology Private Ltd, 7) Larting Private Ltd, 8) Magic Bird Technology Private Ltd, and 9) Acepearl Services Private Ltd
"Account balances worth Rs 9.82 crore of various Chinese-controlled entities maintained with payment gateways, in respect of an investigation relating to the misuse of app-based token named HPZ and other similar applications by several entities, have been frozen," said the ED.
HPZ was an app-based token which promised users of large gains against investment by declaring the same as "investing in mining machines for Bitcoin and other cryptocurrencies". The money laundering case stems from an October 2021 FIR filed against the accused company and its linked persons by the cyber crime unit of the Kohima Police in Nagaland.
What's the case against Chinese loan apps?
A number of Chinese-controlled loan apps have been found to be indulging in predatory lending recently. Besides unethical operations, these apps utilise loopholes in the regulations and often operate in violation of existing rules and regulations.
Such apps mushroomed during the Covid-19 pandemic as people faced financial issues and needed quick cash and these apps lent money for periods ranging from a week to 30 days. They would charge high interest rates and processing fees. Moreover, these apps would harass the users over the repayment of their dues, leading to reported incidents of dozens of suicides.
"Through these apps, fraudsters target the low income groups or the not-so savvy financial people, wherein smaller amount of money is lent. The modus operandi usually involves deduction of processing fees from the loan, combined with penalties, and at significantly higher rates of interest in cases of delay in payments," said KV Karthik of Deloitte India to IANS.
Earlier this month, the ED had carried out searches at payment gateway companies like like Easebuzz, Razorpay, Cashfree and Paytm and had frozen Rs 46.67 crores of such Chinese-controlled apps. These companies had said that the funds did not belong to them and they were extending full cooperation to the ED in this investigation.
The ED has also sought cancellation of licences of NBFCs linked to these loan apps.
"Investigating agencies found that various [Chinese controlled] fintech companies in collusion with NBFC had thus indulged in predatory lending, by-passing the regulatory system...Earlier, the Enforcement Directorate, the Indian enforcement agency, had written to the RBI seeking cancellation of licenses of NBFCs linked to Chinese loan apps in digital lending," reported IANS.
Google asked to curb predatory lending apps: Report
The Government of India and Reserve Bank of India (RBI) earlier asked Google to check the presence of predatory lending apps on its platforms, as per a report. Google Play Store's is one of the most popular destinations for downloading apps for mobiles.
Google has also started to amend policies. Outlook earlier this month reported: "Google is set to roll out a new advertising policy soon for financial services in India which would require advertisers to be verified to show financial services ads in India. As part of the verification, advertisers must demonstrate that they are licensed with the relevant financial services regulator."
Notably, while the government sets regulations, it's only the platforms, such as Google's Play Store, that can enforce these regulations as they control those platforms, not the government or regulators.
Meanwhile, the Union government is also in the process of making a "white list" of apps authorised for lending purposes, which are meant to filter out apps like those currently under investigation.
(With PTI inputs)