In July this year, the Delhi High court declared that the online loan apps should not be charging people with high-interest rates and processing fees for the loans they provide. The Delhi High Court has sympathized with people who find themselves in a fix after these online lending institutions charge them with exorbitant interests and deduct a huge amount in the name of processing fees.
The Public Interest Litigation or PIL filed by a citizen questioned these high-interest rates and said that it was not ethical on the part of these companies to loot ordinary people. Delhi High Court agreed with this accusation and has asked both the Centre and the Reserve Bank of India (RBI) to look into the matter and offer solutions.
What did the Delhi High Court Say About Online Loan Apps?
The Delhi High Court has considered the petitioner’s claims and has advised the concerned institutions that the court expects them to look into the problem. The hearing was presided over by Chief Justice D N Patel and Justice Jyoti Singh, who were firm in improving the situation.
The bench of judges has noted that the high-interest rates these online loan apps charged have created many problems as the common man cannot keep up with the repayments and close the case. The court has expressed disappointment in the government because they are slow in taking action and resolving the issue.
In January, it was revealed that the court had previously asked the concerned institutions to check on these activities, but they have failed to do so. This time the court has issued new recommendations to handle the problem.
Additionally, Delhi High Court has also praised the petitioner for bringing this problem to the court’s notice. They have remarked that this issue has been plaguing many people, and the plea was filed for the genuine interest and benefit of the people.
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What Is The Recommendation Of Delhi High Court?
While the court has previously asked the Centre and RBI to look into the matter, there was no real work done. The online platforms have continued to issue high-interest loans in an unregulated way. This time the court had given new directions to the Centre, RBI, and all the online loan apps. These directions are:-
- The Centre and RBI should investigate and process all the pleas to see the root causes and offer solutions to tackle them.
- The court has also recommended setting up a separate committee to investigate the problem and develop solutions.
- All the reports and solutions from the Centre and RBI are expected to be presented before the court at the next hearing, scheduled for the 27th of August this year.
- Online loan apps and other lending institutions have been issued warnings that they should not charge such huge interests or deduct much money in processing fees.
- All the concerned institutions should make sure that online loan apps are not harassing or humiliating their customers in case of problems with loan repayment or non-payment.
The Delhi High Court has issued these directions. It expects to hear from all the concerned institutions in the next hearing, which has already been scheduled. The bench had also expressed their displeasure with the Centre and RBI for their initial failure to address the issue.
What Brought About This Decision?
These decisions were the result of the PIL that was filed to look into the matter. This PIL was filed by Dharanidhar Karumojji, who is a freelancer in the digital marketing sector. The petitioner hails from Telangana and is being represented by Advocate Prasant Bhushan.
The plea that was filed has been brought to the court’s notice that over 300 online loan apps have been unethically charging huge amounts of interest to secure their profits. These intuitions provide small loan amounts of 15,000 to 30,000 and expect people to pay about 35–45% in various redundant processing fees.
This amount gets deducted from the loan and people, which makes it unfair for customers. If customers fail to make repayments on time, they are harassed and belittled by the management.
These loans are being issued for short tenures. In case of failed repayments, they charge about 1% interest per day after the repayment date expires. The petitioner’s appeal is to have these practices checked and make sure that they are being regulated.
It also wants the concerned institutions to fix the maximum interest rates levied by the lending institutions and form grievance redressal committees in every state to resolve issues that stem from the problem. It also seeks these institutions to prescribe strict actions if the lending institution is harassing people for repayment.
How Do Online Loan Apps Work?
There are several loan apps online that offer bank loans of small amounts to customers. These loans are being issued under a relatively small tenure. All the documentation process is done online by uploading soft copies of documents.
These loan apps advertise that they provide quick and easy loans to convince people to become a customer. The process of sanctioning and crediting loan amounts is quite fast, but their policies have several problems. This is the reason why action is being taken against them at present.
The online loan apps have most of their customers’ personal information, making it easy to harass them and their families in case of repayment failure. Some of them charge much money in the name of “fees,” and the final loan amount that gets credited is way lower than what was asked.
Additionally, they also charge much interest, which further increases in case of non-payment. The government has issued warnings to the general public to avoid such online lending apps because of the trouble they cause later on.
Conclusion
It is advisable to take loans from trusted banks such as the State Bank of India, Punjab National Bank, etc., and NBFCs like Tata Capital, Money View, etc. While online apps provide fast loans, customers often find themselves in trouble with their unethical policies.
The plea that has been filed seeks to put regulations on these online apps not to charge their customers unnecessarily and harass them later. The Delhi High Court has also agreed with the appeal and asked the Centre and RBI to take strict actions and offer immediate solutions.
The Additional Solicitor General Chetan Sharma and standing counsel Anurag Ahluwalia have agreed to follow the court’s directions. They have assured that the government will do the necessary. However, they have also asked for some time to resolve the issue.
The RBI, being represented by Advocate Ramesh Babu MR, has agreed to cooperate with the court and remarked that a committee is already being made. Still, it needs time to process all the information. At the same time, RBI also said that their power is limited to banks and NBFCs and not online loan apps.
