More Than 20 Illegal Online Lending Apps Extorting Ugandans Reported by UMRA

The Uganda Microfinance Regulatory Authority (UMRA) issued a public notice this week warning Ugandans against several illegal online lending apps in Uganda taking advantage of citizens and urging the public to stop engaging with the unauthorized entities.

According to UMRA, the online lending apps which have flooded the Google Play store and other online advertising platforms claiming to offer loans at attractive interest rates are operating outside the legal framework established by the Tier 4 Microfinance Institutions and Money Lenders Act, 2016, and the newly introduced Digital Lending Guidelines of 2024.

UMRA was established to regulate and supervise microfinance institutions and money lenders in Uganda. The authority’s mandate includes ensuring compliance with consumer protection laws and safeguarding borrowers from predatory lending practices. However, a gradual rise of unregulated online lending apps pretending to be legit lending institutions has led to growing concerns over the years regarding consumer data privacy, exorbitant interest rates, and unethical recovery practices.

In 2023, the Federal Trade Commission (FTC) estimated losses to consumer fraud to the tune of more than $10 billion. Fraudulent lenders and other criminals have adapted different tactics when it comes to the digital world, costing loan scam victims billions of dollars. The largest contributor was investment scams, but personal loan scams were also in the mix.

A few Ugandans, have been brave enough to raise awareness against these illegal online lending apps. Other reports from different sources have also indicated that these dodgy apps employ dirty, aggressive tactics against borrowers in the form of harassment and intimidation to recover debts.

Several victims according to Tech Jaja, have reported and shared harrowing experiences of being shamed on social media or threatened with exposure to their contacts if they do not pay back their loans in time, leading to emotional distress and reputational damage.

To warn the public, UMRA has identified several online lending applications operating illegally in Uganda that citizens should stay away from. Below is the comprehensive list of these apps:

Key signs and steps to take to avoid being scammed into using online lending apps

Before taking any loan, especially from online apps pretending to be legit lending finance institutions, you should ask yourself these questions first:

1. Is it registered and legally approved by the UMRA and it is a fully registered entity?
2. Does it have a physical office with a registered business name and evidence of operating for more than 5 years at least?
3. Are the interest rates and offers made too good to be true?
4. Are the loan approvals done without proper evaluation or any existing paperwork?
5. You can not access or find it difficult to understand the fine print/terms.
6. The lending app asks to access vital parts of your phone such as your contact list, call records, media, storage and other areas deemed a cybersecurity risk without consent.
7. Exorbitant interest rates often exceed 30% per month after signing up.

Another few things to note before jumping straight into an online lending scheme as advised by Bankrate are these:

• A lender can’t guarantee loan approval without a proper evaluation. A guarantee for approval is a red flag.
• Take your time to read the fine print. Walk away if you find hidden or upfront costs or if you cannot find verifiable accreditation or registration connected to the lender.
• Prioritize the verification of secure online interactions before giving away any personal details.
• Educate yourself on cybercrime trends to protect yourself and your assets.

Cybercrime is always evolving, and there is no one-size-fits-all solution to spotting all the fraudulent online lending apps, however, it’s always your responsibility to take due diligence to safeguard yourself online before you end up in a cycle of debt.

One thing to note is that these unauthorized lenders frequently access personal data without consent, violating the Data Protection and Privacy Act of 2019. This includes accessing call records and using personal contacts to pressure borrowers.

Several reports indicate that these apps employ aggressive collection methods, including harassment through social media and threats to involve borrowers’ contacts. Also, these apps do not have a physical presence or registered business name, making it difficult for borrowers to seek redress in case of disputes.