Loan Frauds in India

Loan frauds as a percentage of total banking frauds jumped to 90% in fiscal 2019 from 55% in fiscal 2018 after regulatory standards were changed for banks reporting non-performing assets (NPAs).

How to safeguard yourself from such frauds

Fraudsters in phishing scams obtain details of personal or financial information of the victim

• Look for a secure payment (https:// – URL with a pad lock symbol)
• Never share OTP / PIN Numbers in any form, to the buyer or seller
• Never do transactions while you are on call
• Do not click and fill up any short links provided by the buyer or seller
• Do not fill google forms provided by the buyer or seller
• Do not scan QR codes, if you scan, it means your money is getting debited from account
• Banker will never ask for an advance fee before the processing of loan application. Banks charge a processing fee, which is deducted from the loan amount

Online Loan Fraud

Don’t become a victim of Online Loan Fraud

As per the information compiled from various banks, so far 2,313 cases are reported in last three years and majority of these loan frauds come from

(a) Fake agents representing corporates / Pradhan Mantri Mudra Yojana

(b) Fake identity personal loan frauds and

(c) Fake instant personal loans that are being offered through SMS / WhatsApp.

Modus Operandi

Scammers do a random calling of numbers collected from dark web of prospective persons who are looking for loans and then use the phishing techniques to collect money. Let me explain all three modus operandi separately.

(a) Fake agents representing corporates

Scammers make random calls, send SMS / WhatsApp texts and gain confidence on the telephonic discussions. Victims get lured to send their credentials and in the next step they get a fake verification completeness certificate and a scanned copy of the cheque.

After that scammers ask the victim to send fake GST and support fee and to gain the confidence of the victim the scammers will send a courier receipt of the cheque sent. There were instances where the scammers offer loan to their spouses and redo the same process gain.

(b) Fake identity personal loan frauds

Details of the identity cards like PAN/ Aadhaar card are bought by the scammers to apply for the personal loans with morphed photographs. They open a bank account and maintain regular salary transfers, and then apply for loans. Once the loan is sanctioned the scammer disconnects all communications.

Usually victims come to know about the scam only when they apply for a new loan and they see someone has already applied for loan on his identity (As reflected in CIBIL). Many a time victims get calls from collection agents asking them to pay the EMI amounts. Usually in this type of cases the bank employees are also part of the scam.

(c) Fake instant personal loan fraud

Victims get SMS / WhatsApp texts of instant personal loans. When the victim calls the number and start the process, the scammers asks them fill few forms which has OTP / UPIN details and there by lose money.

Warning signs of Online Loan Fraud

No credit check required

The scammer will not bother to check the credit scores and will put more focus on collecting personal details.

Lender is not registered with the government legally

To continue in the lending business, it is mandatory for lenders to register with the government.

No physical address

Lender does not provide any physical address or contact information to the victim. Once you transfer the money, he will stop contacting or does respond to calls/ mails. It will be very difficult to reach the scammer at later point.

Advance payment

Scammers might demand advance payment of certain fees in the name of GST or processing fees. No reputed banker will ask for payment before processing the loan application.

Offer expires in few days

Scammers come up with limited period offers and ask applicants to make decisions quickly using scareware tactics, saying the offer expires soon. Basically, reputed bankers offer interest rates after evaluating your credit history.

Here’s how to spot a Legitimate Lender

A legitimate lender offers multiple clues if you know what to look for. Some of those signs of a real business include:

• Easy to reach. The lender will have a physical address, telephone number, email available on their website. They may also have an online chat function. They’re easy to reach and have the online presence of an established business.
• Good customer service. The staff will be trained in customer service and employees of a reputable lender can answer your questions and offer suggestions when appropriate.
• Interest in credit history. No legitimate lender is going to lend money without checking on your ability to pay it back. Even if they advertise that they specialize in those with poor credit, they’re still going to run a credit report and base their loan options on the findings.
• Search reviews online. Yelp!, the Better Business Bureau, Google Reviews and other review sites are terrific resources for vetting potential lenders. If you see multiple users tagging a business as a scam online, then it’s best to stay away.
• Complete loan terms. A legitimate lender will go over the loan terms with you and send them to you in writing too. They’ll be clear about terms.
• No upfront payment. Legitimate loan companies won’t ask for upfront payment either in cash or gift cards. This is a common tool that scammers use to get untraceable money from victims.

7 signs a lender may be a Fraud

1. The lender isn’t interested in your payment history

One of the upfront disclosures you should see is the requirement to pull your credit report before lending you money.

Reputable lenders make it clear that they’ll need to look at your credit, sometimes getting reports from all three major credit bureaus (Equifax, TransUnion and Experian). They need to know whether you have a history of paying bills on time and in full, which offers them some assurance that you’ll be just as diligent about repaying a loan.

On the other hand, the operators of loan scams aren’t really interested in timely repayment. They tend to do the opposite, seeking high-risk borrowers who are likely to fall behind on loan payments and, as a result, incur their excessively high late fees and penalties.

2. The lender isn’t registered in your state

The Federal Trade Commission (FTC) requires that lenders and loan brokers must register in the states where they conduct business. If a lender you’re interested in does not list any states, you could be dealing with a loan scam.

Check the lender’s website to verify a list of states where it legally conducts business. If you don’t find it, contact your state attorney general’s office for further verification. Lenders also must operate under a bank charter, so look for that information on the lender’s website as well.

3. The lender demands a prepaid debit card

Some scammers will require you to provide a prepaid debit card, claiming they need it for insurance, collateral or fees. Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but those charges are deducted from your loan.

A prepaid debit card can be a useful tool for personal loan scams. It’s virtually as untraceable as cash, and good luck reporting it as stolen if you’ve voluntarily given it to a scammer.

4. The lender calls, writes or knocks

Legitimate lenders typically advertise in ways you would expect, such as online or through other mass media. If you get a loan offer by phone, through the mail or even a door-to-door solicitation, be on your guard immediately. According to the FTC, it’s illegal for companies to offer a loan in the U.S. over the phone.

5. The lender’s website isn’t secure

When visiting a lender’s site, what you don’t see can be just as important as what you do see. Always look for:

A padlock symbol on any pages where you’re asked to provide personal information

An “s” after “http” on the site address — “s” as in secure” — so it shows as “https://www…”

The padlock symbol and the secure address mean the site is protected from identity thieves who steal personal information and sell it to other criminals.

At best, the lack of these safety measures means the lender isn’t concerned about the integrity of the site. At worst, it could mean the lender is leaving your information exposed on purpose as part of a loan scam.

6. The lender has no physical address

Make sure the lender you’re interested in has provided a physical location. (Even then, you will still want to plug that address into Google Maps. In some cases, businesses running personal loan scams will list addresses that are actually vacant lots.)

If you don’t find any sign of an actual physical address, you should avoid the lender. Many operators of loan scams would rather be untraceable so they can avoid legal consequences.

7. The lender pressures you to act immediately

Don’t fall for the urgency plea. One of the hallmarks of loan personal scams is giving you an immediate deadline to take out the loan because the offer expires quickly — possibly even the next day.

A lender that uses this kind of high-pressure tactic could be up to no good. It may be a ploy to get you to make a rash decision.

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