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Lending app publicly shames you when you’re late on loan payment
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- nimbius 6y ago>It was the third loan that upended his life. He needed it to top up his rent, because by then a vicious cycle had begun, wherein he would pay off his loan then borrow again to fill the hole that the last payment had left in his finances. So this is just a Payday lender that thinks the potential for a shamed and disgruntled foreign national to clean out it's office with a machete is just too far removed...
- toomuchtodo 6y agoTraditionally, peer pressure and social mores are a proven path to high repayment rates for micro lending in the developing world (which already have usury rates, mind you). This just streamlines the process. https://www.vox.com/future-perfect/2019/1/15/18182167/microcredit-microfinance-poverty-grameen-bank-yunus https://www.vox.com/future-perfect/2019/1/15/18182167/microc... Control F “Grameen Bank”, although the entire piece is very informative on the topic.
- thoughtstheseus 6y agoDoes it matter that the pressure is from software vs. people?
- cortesoft 6y agoThe pressure isn’t from the software, it is from the people the software sends messages to.
- JMTQp8lwXL 6y agoThe longer the debt remains outstanding, the more the lender can collect due to accumulating interest. You almost would want to avoid the peer pressure, so long as some sort of payment is regularly made.
- dheera 6y agoRight, in a lot of developing parts of the world, the concept of social credit is huge. Your ability to succeed in life is far more dependent on who you know that trusts you, than your own skills as an individual.
- rsynnott 6y agoNot sure how likely someone committing mass murder over debt is...
- w-j-w 6y agoSeems like one of the more plausible reasons to me. Especially when public shame is involved.
- warent 6y agoTax liabilities was enough to set one guy over the edge. People don't like feeling backed into a corner, and some people respond with unfathomable violence. https://en.m.wikipedia.org/wiki/2010_Austin_suicide_attack https://en.m.wikipedia.org/wiki/2010_Austin_suicide_attack
- JackFr 6y agoAlong with all of the obvious badness, this simply seems like a terrible business model. It's a gun with one bullet. Ultimately the goal of collections, is to collect the money. After you've shot your wad, why would I ever pay you back? After 2-3 stories like this, why would anyone ever borrow? One of the hardest things with consumer credit is customer acquisition, and as OKash gains this reputation, they will only attract the most desperate, least likely to ever repay customers.
- crowf 6y agoI guess you would be surprised at the amount of people who borrow from people with an actual gun. The short explanation is that some people are really desperate for money right now.
- huac 6y agoI would expect the opposite to be true; if you are known to offer good rates but with onerous consequences, then your counterparties should self-select to be those who are likely to repay. Lower rates are simply your CAC.
- BoorishBears 6y agoExcept right in the article we see that people realize the system is easily gamed such that the consequences are trivial, causing the opposite effect. Not to mention the proof in the pudding of their credit losses...
- rsynnott 6y agoI’m not sure how new this is in principle. The dodgier end of the debt collection industry has long used public shaming as a tactic. And then of course on the other end there are official tax defaulters’ lists etc.
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- BrianHenryIE 6y agoIn Ireland the judgement details (i.e. your name) get printed in Stubbs' Gazette. https://www.stubbsgazette.ie/news/weekly-judgment-roundup https://www.stubbsgazette.ie/news/weekly-judgment-roundup
- hardwaresofton 6y ago> Coincidentally, that was the same year that Opay, a fintech company partially owned by the software-maker Opera, launched OKash in Kenya. The majority of Opera’s operations had been bought by a consortium of Chinese investors two years earlier, and shortly afterward, the company went on an expansion spree, announcing plans to invest $100 million in East Africa. While Opera’s then managing director, a former banker named Edward Ndichu, said at the time that the app would protect users’ personal information, he never explained how the company planned to safeguard its financial investment. But the answer was buried in OKash’s terms and conditions: When users download the app, they give it permission to access their contacts. "protect users' personal information" indeed.
- Stratoscope 6y agoOh my, this is (or was) the late great company that made the Opera browser. How the mighty have fallen... :-(
- hardwaresofton 6y agoYeah I was going to put in a disparaging remark towards Opera browser in my comment, but thought better of it.
- lmg643 6y agotechnology recreates the town square of medieval times - publicly shame delinquent borrowers - what amazing progress!
- DeepThoughts 6y agoNext up: we’re disrupting finance by bringing back debtors prisons!
- londons_explore 6y agoA court mandating a proportion of your salary be diverted to repay debt is effectively a debtors prison.
- diffeomorphism 6y agoExcept, you know, for the whole prison part.
- adrr 6y agoStill exists today. Some examples i can think up off the top of my head. Go to Vegas and don't pay off your gambling tab. Or don't pay off your traffic fines. Don't pay your owed taxes. Don't pay your restaurant tab.
- cwhiz 6y agoNot paying your restaurant or gambling tab is indistinguishable from theft. As far as I know you cannot go to prison for owed taxes.
- adrr 6y agoAny other service that is post paid, there is no risk of jail time. I can visit the dentist and get my teeth cleaned and get the bill and not pay. I can get my home remodeled and not pay. I can rack up a $50,000 bill on AWS and not pay. All these would go to collections and the police wouldn’t hall me off to jail. Not paying your tax is a felony.
- dheera 6y agoI suppose people could easily circumvent this by keeping their contact lists on paper or in a text file instead of programming them into the phone's contact list feature.
- hellotomyrars 6y agoYeah I mean it does seem somewhat easy to game but I assume there is a vetting process that does it's best to try and account for that. I would be interested to know more about what is required by the lender to approve these loans.
- imtringued 6y agoThere is probably a human in the loop that estimates the value of your contact list.
- saagarjha 6y ago> “We want to be regulated,” Kevin Mutiso, the founder and CEO of Alternative Circle, which offers a micro-loan product called Shika, wrote in an email. Mutiso, who is also one of the founding members of DLAK, worries that, if it goes unregulated much longer, Kenyans may give up on digital credit entirely. “We would [only] need light touch regulations,” he wrote, “minimum capital requirements, customer verification, and submission of positive and negative data to credit bureaus.” This sounds like it will end quite poorly.
- gojomo 6y agoJust a text message? Psh. In China some microlenders will accept nude pictures as collateral – & release them publicly if you don't pay. https://www.vice.com/en_us/article/kzv38w/millennials-in-china-are-using-nudes-to-secure-loans https://www.vice.com/en_us/article/kzv38w/millennials-in-chi...
- gruez 6y ago> apply for loan > use deepfake pics as collateral (preferably ones where the "body" has identifying characteristics that's different than yours so you can repudiate it, eg. birth marks, tattoos) > ??? > profit!
- est 6y agoNah, they specifically require showing your face the same as the photo on your National ID, and you are required to hold your national ID as part of the nude photo. Deepfake whatever you want, it's still your face.
- gruez 6y ago>Deepfake whatever you want, it's still your face. See part about the part about repudiation in my original comment. Come to think of it, deepfaking your face onto someone else's body is probably the hard way. It's way easier to mutilate (ie. making subtle but plausible edits) a real nude of yourself so you can repudiate it later.
- retsibsi 6y agoYou then have to reveal those parts of your body unedited, though. And in sufficient detail to convince people that these new photos are the unedited ones. If you really need to convince some small number of people that the pictures are fake, you can reveal yourself to them in private. But I can't think of many scenarios in which either of these approaches leave you better off than just having real nudes made public in the first place.
- nateberkopec 6y agoCommunity lending in Africa (and the African diaspora) has a lot of history: https://thegrio.com/2011/05/20/sou-sou-black-immigrants-bring-savings-club-stateside/ https://thegrio.com/2011/05/20/sou-sou-black-immigrants-brin... Given how susu circles work, the article seems to just be describing a high tech version of a thousands year old practice.
- BoorishBears 6y agoLol seriously? As someone from West Africa, it's is such a perversion of the concept you might as well say Facebook is just a high tech version of a bulletin board... The whole idea is participants come from a tight knit group that know and trust each other, not literally every person in your contact list. And what kind of community lending starts harassing members preemptively to illicit future payments, them starts spamming people who are unrelated to them indiscriminately?
- wisty 6y agoI'm guessing it works because of the (relatively) small amounts of money involved. A years savings ($1000-20,000 depending on the sou sou) is not worth pissing off your entire social network over. The real value wouldn't be the finance, but that the group dynamic would encourage commitment to savings. I'm guessing these people would generally not really need loans, they want a bank that will publicly scold them if they're late with their monthly savings deposit. They get a big, useful chunk of money to make a major purchase (or deposit on a real loan), and get the community pressure to save for it. FTA - a "sou sou" is basically a group savings system - everyone puts money in the pot and once a month one group gets to take out the lot (often based on needs / goals / whatever the organiser thinks). Technically the first family to get the take would be advantaged (since it's basically a zero interest loan for them) but it's a relatively small amount (interest on a year's saving) so it's not like the others are getting massively stiffed (compared to what they'd get leaving money in a retail savings account at 1% interest minus fees or whatever it is right now).
- trashcan 6y agoI've heard of Tanda which sounds very similar: https://www.thebalance.com/how-do-tandas-work-4582180 https://www.thebalance.com/how-do-tandas-work-4582180
- exabrial 6y agoYikes. Multiple tightropes to walk. It's likely the borrower in some situations doesn't understand simple interest and how quickly it can compound at high interest rates. On the opposite spectrum, denying things to people because "they're not [educated|correct skin color|correct political affiliation|member of some social group]" has been used to deny many many people the right to vote, protest, socialize, or ironically, obtain an education.
- 2Gkashmiri 6y agoWhat kind of interest rates do these "apps" generally offer? I do remember some time ago opera or someone else was heckled for excessive rates or similar. My question, why do people go for these p2p lending in the first place? Is it the ease of use? Or that your credit score is shit? Or what exactly? In the current fucking pandemic with job losses and markets at shit, I am seeing people buying stupid stuff like phones and cars for gaming and "entertainment" on credit. Why? If you have the capital NOW, then go for it. Otherwise you dont probably need it. Why is this fi ancial literacy difficult to comprehend?
- noobermin 6y agoReading the story and how fintech arose in Kenya due to the lack of regulation of the apps compared to the banking sector. Hard to resist the confirmation bias because that definitely confirms my biases.
- firefoxd 6y agoThere was recently an Ask HN about an app doing similar thing and was banned on the play store: [1] > We are a FinTech startup in India. We give unserved people a credit card. To ensure recovery we collect user's contacts and use them to remind people of their bill if they don't pay. All of this is covered in our TnC, and we warn users of the actions we will take before we do so. [1]:https://news.ycombinator.com/item?id=22840524 https://news.ycombinator.com/item?id=22840524
- Brajeshwar 6y agoThis is unfortunate. I remember a Startup pitching, at a Pitch event in Bangalore, that as one of their key feature. I was stunned and knew that it was illegal and unethical. That particular Startup shut shop but I won't be surprised this is the norm. Back then, I tweeted[1] in utter disbelief when the CEO openly claimed that their app secretly downloads all your contacts to contact them when the borrower fails to pay. That seem like one of their under-writing clause. 1. https://twitter.com/brajeshwar/status/935564492901040128 https://twitter.com/brajeshwar/status/935564492901040128
- yamrzou 6y agoIf the practice is clearly outlined in the terms and conditions which the user accepts before using the app (so, not secretly downloading contacts as in your example), I would not oppose it, nor call it unethical. The legality would depend on the country's laws. Why would this be considered unethical, while not paying back would not be considered theft? If I were to lend someone some money, the deadline should be agreed upon and I would adjust it at the request of the borrower once or twice. I would also tolerate a delay of a few months, or a maybe a year, depending on the situation. But I would be pretty pissed off if they defaulted after that. The idea that they pay back in social credit seems like a good solution to prevent this from happening again with others.
- CodeWriter23 6y agoIn the United States we have laws against third-party disclosure of debt.
- BoorishBears 6y ago> Why would this be considered unethical, while not paying back would not be considered theft? So you get that not paying it back is not theft, yet you think the behavior outlined in the article is ethical? There's so many layers of unethicality it's insane. The idea that these people's privacy is being invaded to such a degree their entire social graph is stored on these servers, the fact these people understand what they're doing is bad insofar as to say they stopped but continue anyways, the kinds of terms these loans provide with such flimsy "collateral", the use of intimidation to resolve a debt?, the psychological effects of treating people like these companies are? > The idea that they pay back in social credit seems like a good solution to prevent this from happening again with others. Did you read the article? (Ignoring the ridiculous of acting like it's some altruistic endeavor to try and "save others" from getting taking advantage of...) It doesn't even prevent it from happening to them let alone someone else! They go through these people's contacts, start harassing them and their acquaintances, and the people still end up not paying, and in fact they end up inviting people who actively plan to game their "collateral" with false info.
- glorybetothefed 6y agoOh yes. If you are a lowly schmuck who cannot pay back a micro-loan, they "tattle" to your friends as a supposed pressure tactic. But if you are a Wall Street bank about to go under, the highest powers in the Government publicly come to your rescue to prevent a "liquidity crisis" and "further systemic shocks". And then there are some who actually wonder what is going on with the riots. Is it the Antifa? Is it Trump's supporters in disguise? Is it Russian or Chinese agents? Or could it just be that it is merely the un/underemployed vs the fully employed? Also, a message to those who brought a guillotine to Jeff Bezos' house. You are all misguided missiles. If you are itching to put someone's head on the chopping block, I would start with Ben Bernanke.
- gravityawave 6y agoThis is not a good idea because it can reveal people vulnerable to blackmail/compromise. Oh that security guard who works at the bank is late on her loan payment? Great, we can recapitalize her loan for inside help to rob the bank.
- langitbiru 6y agoReading this article reminds me of "Debt The First 5000 Years" written by David Graeber (RIP). I just read the sample. The author spoke to an activist which said, "Surely one has to pay one's debts." But does one have to? It makes me ponder the answer. Btw, I know there are some critics aimed to this book.
- wdb 6y agoMaybe we should shame large companies like EY when they are late with paying their bills and trying to force their own paying rules on you as a contractor. If my invoice needs to be paid in 14 days you don’t change it and say I only pay every 90 days and get all angry when you charge them interest as agreed in your terms and conditions.