· Borrower Rights And Legal Remedies · 3 min read
The Legal Side of Personal Loan Apps: What Borrowers Must Know
This blog explains how to stay safe while using personal loan apps, covering RBI regulations, privacy issues, legal remedies, and steps against harassment.
Rise of App-Based Loans
Over the past couple of years, personal loan apps have gained massive popularity in India. In a few taps, borrowers are able to have instant credit in their bank accounts without any paperwork and without waiting in long queues. The ease of access, facilitated mostly among individuals who had poor access to on-ground banking, has been extending the lives of app-based loans.
This convenience has, however, revealed a dark side. Most of these applications exist in legal grey areas, engage in predatory recovery measures, and place credit payment victims at the risk of extortion and misuse of information.
RBI Regulations and Legal Loopholes
The Reserve Bank of India (RBI) has noticed the growing menace. In its Guidelines on Digital Lending issued in September 2022, the RBI laid down some important rules:
● Loan disbursement can only be done by RBI-registered entities (banks or NBFCs).
● Lending Service Providers (LSPs) are required to identify the lending entity.
● There should be no automatic bank account debits without express approval.
However, numerous unlicensed or fly-by-night apps are not registered with the RBI. They often partner with small NBFCs or pose as legitimate platforms. Since they’re not under direct RBI oversight, redressal becomes difficult.
Borrowers must ensure the app is listed by the RBI or linked to an RBI-regulated NBFC. If not, it’s likely an illegal lender.
Issues of Privacy and Data Misuse
This is where the real danger lies. Most loan apps request access to contacts, photos, messages, and even location. Once granted, they misuse this data, often as a tool of psychological harassment.
Borrowers have reported agents threatening to contact friends, sending morphed images to family, or shaming them publicly. These actions are not just unethical—they’re illegal.
Privacy is a fundamental right under the Information Technology Act, 2000 and the Puttaswamy judgment of 2017. The Digital Personal Data Protection Act, 2023, further restricts how digital platforms can handle sensitive financial data.
Filing Complaints with the Cyber Cell
Never stay silent if you’re being harassed by a loan app. You have legal remedies:
File a complaint with the local cybercrime cell or submit it online at cybercrime.gov.in.
Complain to the RBI Ombudsman—especially if the app is linked to a registered NBFC.
Send a legal notice citing criminal intimidation, defamation, and illegal data misuse.
Report the app on the Google Play Store if it violates Google’s loan app policy.
Conclusion
Personal loan apps may offer speed, but not always safety. Borrowers must stay informed—check app permissions, verify registration, and report misconduct. A loan should never cost your dignity. When lenders cross the line, know that the law stands with you. Your privacy, peace, and protection come first.
