Amid rising cases of fraud and harassment, the Reserve Bank of India recently issued new guidelines on digital lending to safeguard borrowers’ interests. Existing customers availing of new loans and new customers getting on board will be the beneficiaries of these guidelines. The deadline for complying with the new guidelines is November 30, 2022.
Let’s look at how these guidelines will protect customers.
Cooling-off period available to borrowers
Direct disbursal of loan amount to borrower’s account
Upfront disclosure of loan terms and charges
All loans to be reported to bureaus
Lending Service Providers (LSPs) can’t charge customers fees
Fees or charges payable to the lending service provider (LSP) by the regulated entity (RE) cannot be charged directly by the LSP to customers. The RE must pay the two fees directly to the LSPs. This has been done to ensure that borrowers transact directly with lenders.
List of lending service providers (LSPs) is a must
All regulated lenders must publish the list of their lending service providers (LSPs) and Digital Lending Apps (DLAs) on their websites. All LSPs and DLAs must provide a link to the websites of the lenders they are associated with, on their websites and mobile apps for customers to access directly.
Recovery agent details to be shared with borrowers
When sanctioning the loan, lenders must provide the details of authorized recovery agents who may approach the borrower to recover the loan amount. Changes in this information must be communicated to the borrowers. This can help borrowers steer clear of fake-recovery agents.
Borrower data privacy is of paramount importance
Regulated entities (lenders) lending digitally must ensure that customer data collected by their LSPs and DLAs is only need-based and done with the prior, explicit consent of the borrowers. Customers must also be given the option to deny consent for the use of specific data and restrict disclosure to third parties on all DLA platforms of registered entities. If required, the customer should have the option to have the app delete or forget the recorded data. The onus is on the lenders to ensure that their LSPs or DLAs do not store customers’ personal information except basic data such as their name, contact details and address.
The new guidelines by the central bank will significantly help borrowers against cyber financial frauds and effectively rule out any wrongdoings with them as long as they deal with regulated entities.
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