ED ties assets worth 76 Cr INR in Chinese loan application case
The ruling was part of a money laundering investigation against some Chinese loan application companies
Earlier today, RBI announced a task force to look into the same issue
ED said this money-lending activity run by these FinTech companies was illegal or “unauthorized” under any law.
In another crackdown on rogue digital lending apps, tThe Law Enforcement Directorate (ED) of the Central Investigation Agency has attached assets worth over 76 Cr. The companies affected include three fintech companies run by Chinese nationals, three non-bank financial companies and the payment gateway backed by Tiger Global Razorpay, according to reports.
The move was part of a money laundering investigation against some Chinese loan application companies whose intimidation tactics allegedly forced a lot debtors to end their life during stressful times of Covid-19. In January, the ED had led payment gateways such as Razorpay and Paytm to stop payment processing for these malicious applications.
According to the ED, the attached amount relates to seven companies, three of which are fintech (financial technologies), namely Mad Elephant Network Technology Private Limited, Baryonyx Technologies Private Limited and Cloud Atlas Future Technology Private Limited which are controlled by Chinese nationals. and three NBFCs (non-bank financial corporations) registered with the RBI. The NBFCs are X10 Financial Services Private Limited, Track Fin-ed Private Limited and Jamnadas Morarjee Finance Private Limited, the ED said.
The move comes a day before the Reserve Bank of India (RBI) announced concrete steps to put in place a Working Group (WG) to regulate mobile digital lending apps, amid growing reports of such online lending platforms charging exorbitant interest rates and harassing their customers. The RBI announced the establishment of this working group in January.
This is the first case of criminal asset seizure by the ED in these cases, which is also investigating other cases of this nature in other states. The ED said in a statement that its criminal investigation, in accordance with the provisions of the Prevention of Money Laundering Act (PMLA), is based on several FIRs filed by police from the Criminal Investigation Department (CID) in Bengaluru. after receiving “complaints from various clients, who had used loans and were harassed by the collectors of these money lending companies.”
How loan applications got rogue
Lending technology platforms, which typically have access to a borrower’s directory contacts and the terms of digital consumer loan agreements, allowed lenders to call these contacts to collect loans. The public shame tactics employed by digital lending startups have led several borrowers to end their lives following immense threats and harassment. While banks and large NBFCs prefer to outsource loan collection to agents, most startups acting as small NBFCs or bank / NBFC distribution partners have their skin in the game to ensure loan collection. Therefore, most of them rely on aggressive follow-up tactics when borrowers are unable to repay their contributions on time.
The ED said the fintech companies have an “agreement” with the respective NBFCs for loan disbursement through digital lending applications. “The amount attached by ED also includes an amount of fees charged by Razorpay Software Private Limited to the extent of INR 86.44 lakh for failing to perform due diligence in the case of a company registered with it for disbursement. and loan recovery, “the ED alleged.
The total amount of properties attached under the latest interim order issued under the PMLA is 76.67 Cr INR and some Indians are also under the ED scanner in these cases. The agency said its investigation found that Chinese loan applications “offered loans to individuals and charged usurious interest rates and processing fees.”
The ED said this money-lending activity run by these FinTech companies was illegal or “unauthorized” under any law.
Loan applications through their debt collectors have resorted to systematic abuse, harassment and threat of defaulters through call centers for coercive loan collection by obtaining sensitive data from the bank. user stored on mobile phones such as contacts, photographs and using them to defame or blackmail. the borrower, ”said the DE.
He said the people behind these loan applications “even threatened borrowers by sending bogus legal opinions to their loved ones and family members.”
In 2020, the number of suicides had double compared to 2019. And the financial crisis, increasing debt and harassment of debt collectors have led to many of these suicides.
“These NBFCs knowingly let these fintech companies use their names for the purpose of earning commissions regardless of the conduct of these fintech companies in their dealings with customers who are a vulnerable part of society and who have a need. urgent funds due to the current situation. pandemic situation (Covid-19), ”noted ED’s statement.
Previously, the RBI reportedly asked Google to share the eligibility criteria for listing fintech lending apps on the Google Play Store. Earlier this year, the internet giant took action against certain loan applications that did not meet its loan repayment policies. Google has reportedly removed more than 500 loaner apps from the Google Play Store in India.