Federal IT Minister Syed Aminul Haque said on Monday that the government had launched a crackdown on “illegal loan providers” and 43 loan applications had already been blocked in the country.

“The targeted companies, operating within the lending industry, were registered with the Securities and Exchange Commission,” he said in a statement.

The minister’s announcement comes as the Federal Investigation Agency (FIA) probes a case of a man’s death in Rawalpindi, purportedly by suicide, after he was allegedly threatened by loan apps for failing to pay back ballooning interest on his debts.

During the course of its investigation, the FIA has arrested nine suspects, booked 19 and sealed several offices of loan apps in Islamabad.

The incident has prompted authorities into action, with the IT minister saying in a statement today that Pakistan Telecommunication Authority (PTA) Chairman Major General (retd) Hafeezur Rehman had ordered immediate and swift action against illegal loan applications.

He also highlighted the severity of the issue, shedding light on the involvement of mafia groups operating through social media platforms, particularly Facebook, in such cases.

“These unscrupulous entities have resorted to blackmailing innocent individuals [and] exploiting their financial vulnerabilities,” Haque deplored.

In this connection, he said a comprehensive public awareness campaign had been launched to “safeguard the public”.

“The citizens are urged to report any suspicious loan applications or incidents involving the loan mafia groups to the PTA, the FIA’s (FIA) Cybercrime wing or their local police stations,” he said.

Moreover, the statement said, Haque was in “direct contact” with the FIA director general, to ensure effective coordination in the action against illegal loan apps.

The minister also condemned the “tactics employed by loan mafia groups, including threats of violence, blackmail, and misuse of personal data”.

These actions were in clear violation of the law and must be halted immediately, he stressed, advising the citizens to exercise caution when engaging in online financial transactions and refrain from sharing personal information with unknown parties.

“The ministry has noted the prevalence of online posts promoting money-making schemes,” the statement read, adding that the citizens were urged not to respond to such advertisements and avoid sharing sensitive data or money with such parties.

“As the operation [against illegal loan apps] progresses, the authorities remain vigilant in their efforts to bring the culprits to justice and protect the citizens from falling victim to fraudulent loan schemes,” the statement said.

Luring citizens

Earlier this month, Dawn reported that scores of apps are currently out there luring average folk with instant credit, with misleading terms.

According to research done by Data Darbar, 27 of the apps featuring Google Play Pakistan’s top 100 finance apps were instant credit apps as of June 28. Of them, 19 were offering loans in the local rupee and the top eight alone had estimated downloads of 15.4 million since their launch.

There’s only one more licenced player operating in this space: Sarmaya Microfinance. Many are not registered entities, though the modus operandi of both kinds is similar. Promising low interest rates, they lure users to borrow, often even disbursing the amounts without their confirmation.

However, a sizable chunk of the amount is actually deducted at source, between 21 per cent and 38pc depending on the app, in the name of service and/or processing charges, which is often for 30-90 day periods, sometimes even less.

Yet the annual percentage rates, which is the total cost of borrowing in annual terms, are reported to be in the range of 11-39pc.