Indelible coercive loan apps first block and then turn off your smartphone if you fall behind on repayments

from do you think you own your gear? department

The modern smartphone is a technological marvel, bringing together in its compact format multiple functions: telephone, pager, computer, camera, calculator, diary, multimedia player, radio, television, clock, maps, GPS, voice recorder, electronic book reader , games. device, WiFi access point, flashlight, etc. etc – which required more than a dozen separate devices a few decades ago. So it’s no wonder that most people want one and want to buy a model that offers all these features. However, in many parts of the world, the price of a good smartphone represents a large part of their annual salary. The obvious solution is to take out a loan, but this usually requires a credit score, and many people in these countries have no credit history and may not have a bank account. To circumvent this problem, companies have come up with a new type of smart loan for the “unbanked”, as they are called. A fascinating article on the Rest of the World site, about the Indian Datacultr Application, explains how the system works:

The easiest way for retailers and online stores to get high-end devices into the pockets of working-class people has been through a new lending method: smartphone collateral. Vendors are selling smartphones to new borrowers with high-interest payment plans funded by lending companies, but only after users install an unremovable app at the point of sale. Apps can then monitor repayment behavior throughout the life of the loan. A late payment results in the instant blocking of the phone, rendering it useless. For smartphone lenders and sellers, this form of lending opens up their products to a new class of consumers. But users who buy phones on loan bear the brunt of the coercive refund tactics built into their devices.

The lack of formal credit scores is solved by using the indelible loan application to spy on the smartphone user. By examining how people use the smartphone and accessing their texts, images and location, the app can assess the likelihood of the borrower defaulting on the loan. To avoid this, software like the Datacultr application uses increasingly severe “nudges”:

The app starts by sending audio-visual prompts in regional languages ​​as reminders. If the user misses their first refund, they forcefully change their mobile phone wallpaper. If Datacultr’s data scraping reveals that a user is a prolific selfie taker, for example, the app will send notifications whenever the camera feature is opened. If the user continues to default on the loan, frequently used messaging and social apps like Facebook or Instagram are gradually blocked, severely restricting device usage and ultimately shutting down all phone functionality.

It’s not just India where these loan apps are being rolled out. The Rest of the World article states that the American company PayJoy has licensed its smartphone lock technology to lenders in more than 20 countries, for example in South America and Africa. Google, too, is active in Africa with its own application called “Device Lock Controller”.

While “smartphone collateralization” may indeed allow the “unbanked” to acquire models that would normally be well beyond their budget, there are some obvious problems. The first is the intrusive and coercive nature of nudges and shutdowns. Second, the approach requires people to provide access to personal files on their smartphones in order to assess their creditworthiness in real time. In other words, they have to give up their privacy in exchange for the loan.

Finally, it should be noted that the use of non-removable applications that can take control of the smartphone at any time means that people do not fully own their device. This isn’t a new problem: Techdirt wrote about it in 2011. And in 2014, The New York Times noted that companies lending money for cars were requiring the installation of starter interrupt devices that could immobilize the vehicle in the event of late reimbursement. What’s new is that today all it takes is most mundane 21st century artifacts – a smartphone app – that not only constantly monitors you, but can punish for “bad” behavior with a variety of bespoke digital tortures.

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Filed Under: apps, india, loans, property, smartphones

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