India pushes lending apps to give consumers more transparency and control – Root Devices

India’s central bank has released guidelines for digital lending firms recommending more transparency and oversight for customers, while the South Asian nation’s central bank is taking further steps to crack down on shady practices and creditors.

The guidelines published on Wednesday (PDF) say that lenders will not be allowed to increase a customer’s credit limit without obtaining their consent and will have to explicitly disclose the loan’s annual interest rate. Digital lending apps will also have to obtain the prior express consent of customers before collecting any data, and any such requests must be based on “needs,” the guidelines added.

“In any case, DLAs should give up access to mobile phone resources such as files and media, contact list, call logs, phone functions etc. One-time access can be used for camera, microphone, location or any other facility required for the purpose of boarding/KYC requirements only with the express consent of the borrower,” the guidelines added.

The guidelines, some of which have received in-principle approval and were first proposed last year, follow a spate of flawed loan applications and non-bank financial institutions charging exorbitant amounts to customers in India. Some of these companies were raided by Indian agencies and found to be linked to China, authorities said.

Due to the prevalence of shady practices, Google last year pulled some personal loan apps from the Play Store in India and implemented stricter measures to prevent abuse.

“The Reserve Bank is legally empowered to operate the credit system of the country for its own benefit. In this effort, the Reserve Bank has encouraged innovation in the financial system, products and methods of credit delivery, while ensuring their orderly growth, maintaining the stability of funding and ensuring the protection of the interests of investors and customers,” the central bank said.

“Recently, innovative methods of designing and delivering credit products and servicing them through digital lending have become more important. However, some concerns have also emerged which, if not mitigated, may undermine the confidence of members of the public in the digital lending ecosystem. Concerns mainly relate to unbridled third-party collaboration, mis-selling, data privacy violations, unfair business practices, charging exorbitant interest rates, and unethical collection practices.”

The central bank also proposed that consumers should have the option to accept or decline consent to the use of any specific data, as well as the ability to revoke any previously given consent and delete historically collected data.

Regulated entities will also have to ensure that the loan service providers they work with have appointed a nodal grievance redressal officer to handle complaints filed against fintech startups or other digital lending companies, the guidelines added.

Any loan obtained through digital lending apps must be reported by regulated entities to credit reporting companies, regardless of its nature or duration, the guidelines said.

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