Senate Committee Reveals Loan Apps Charging Up to 1,800% Interest; Crackdown Begins

National Cyber Crime Investigation Agency (NCCIA) reported today that it has removed 90% of fraudulent loan apps in Pakistan. It informed the Senate Standing Committee on IT and Telecom about alarming practices by online loan companies that have trapped thousands of citizens in financial fraud. Officials from the NCCIA revealed that some loan apps were charging interest rates as high as 1,800 percent, leaving borrowers helpless. They said several non-banking financial companies were involved in these fraudulent practices.

According to the officials, the Securities and Exchange Commission of Pakistan (SECP) had issued licenses to such companies back in 2020 but did not impose any strict conditions at that time. This regulatory gap allowed loan apps to misuse their access to customers’ data.

Senate Committee Reveals Loan Apps Charging Up to 1,800% Interest; Crackdown Begins

Once downloaded, these apps gained entry to a user’s photo gallery and contact numbers, which were later misused to harass and blackmail borrowers. “Even if someone borrowed just Rs. 5,000 to buy food, they would end up trapped in debt,” an official explained.

It was further revealed that many borrowers were forced to take loans from one company just to repay another, creating a cycle of never-ending debt.

The officials admitted that SECP had not set any limit on the interest rate earlier, which enabled companies to exploit citizens. However, improvements have now been made in regulations. Currently, loan companies are only allowed to charge up to 100 per cent interest on loans.

To ensure more protection, borrowers are now required to provide details of three guarantors before securing a loan. In addition, loan apps are no longer authorised to access a user’s gallery or contact list.

The committee was also told that action has been taken against nearly 90 per cent of fraudulent loan app companies, which has significantly reduced the scale of this scam. Officials expressed optimism that these measures have helped in controlling the problem to a large extent.

The Senate committee appreciated the crackdown but stressed the need for strict oversight to prevent such practices in the future, ensuring that citizens are protected from exploitation in the digital financial sector.