Lenders are turning to coercive loan apps that shut down smartphones

https://restofworld.org/2021/loans-that-hijack-your-phone-are-coming-to-india/

121 118 5 years ago

yew• 5 years ago

This article really deserves more attention. I hope you repost it at some point.

The Datacultr app mentioned is a particularly barefaced example of efficiently extracting small amounts of money from many users through hardware control.

There's also the idea of (effectively) embedding loans in smart hardware so they follow whoever's actually trying to use it. (Also already thing with cars.)

Both techniques seem likely to have many other applications. Probably very unpleasant ones.

isoprophlex• 5 years ago

Datacultr’s app has access to huge amounts of data: everything from texts, images, and user location. “We did some research and figured out, You know what? People really still want to buy a phone,” Juriasingani told Rest of World, explaining the genesis of his company. “They just can’t afford it.”

If a person engages in these manipulative tactics, they'd be called psychopaths. But for a faceless corporate entity it's of course totally fine.

Surveillance capitalism continues the war on it's users.

tehjoker• 5 years ago

It's sometimes enlightening to read the words of business people in the cant of a mob boss.

akshaybhalotia• 5 years ago

An interesting corollary I heard to "smart hardware that follows you" is "giving loans to generate more data that helps give more loans". That level of profiling sounds scary to me.

Data is being used as collateral in this case, so this model literally treats data as "property", which IMO is not a good way of thinking about data.

potta_coffee• 5 years ago

Extreme example, imagine this kind of software in a prosthetic, pacemaker, or other medical device.

In automotive, "buy-here-pay-here" lots have been using tricky devices to disable and locate cars when payments are missed.

eru• 5 years ago

I see the problems when applied to pacemakers and similar.

But applied to cars, this technology seems like an unalloyed good.

Just like offering your kneecap as a surety can allow people with limited traditional collateral get a loan, this technology broadens who can get loans. (Without the risk of physical injury.)

Animats• 5 years ago

Your phone, car, door, power, and credit card can all now be turned off remotely. This has substantial hacking potential.

ehnto2• 5 years ago

A common retort would be "not my home/car" but societies march onwards to the majority of people renting everything, including cars. So maybe not your house or your car, but most people's, which is a dangerous situation for many to be in. Imagine a slumlord raising rents on a whole building and the computer automatically locking out anyone who doesn't pay, or failing a payment on your car rental when you're away from home and it remotely locking in the middle of nowhere.

These systems will be automated, taking any last shimmer of empathy away and abstracting the owners from the renters via a faceless software layer.

If we are not careful we will end up with a software enabled split society of owners vs renters, where neither interacts with the other and the system is void of any humility or empathy.

That isn't something "the market" can protect against in my opinion, the market will optimize toward monetary efficiency and renters hold no power to influence it. You can't just "find another house" when all properties are owned by the same class enacting the same will.

nicbou2• 5 years ago

This reminds me of Grapes of Wrath. The banks are these distant things that aren't a single person you can reason or fight with. Their agents absolve themselves of any responsibility, and just fulfil the will of The Bank. It's pictured like a monster that everyone feeds but no one controls.

It really stuck with me and resurfaces often.

https://www.cliffsnotes.com/literature/g/the-grapes-of-wrath...

fy20• 5 years ago

remotely locking in the middle of nowhere

It doesn't even need to do that to cause problems. Most likely someone will decide that it should phone home to check the user is allowed access everytime you start the vehicle, and if it can't, well no driving for you today.

https://www.extremetech.com/extreme/306338-phone-app-rental-...

masklinn• 5 years ago

A common retort would be "not my home/car" but societies march onwards to the majority of people renting everything, including cars.

Renting is not even a factor. Tesla can and will locate, unlock, and back out of parking (possibly out of your property) your car remotely for the convenience of the repo man they send if you’re behind on payments. If they achieve FSD the car will probably just drive away as soon as it’s able to.

andraz• 5 years ago

Reminds one of the opening scene fron The 5th element or the opening of Ubiq from Phillip K. Dick.

bryanrasmussen• 5 years ago

The door refused to open. It said, "Five cents, please."

"what are you talking about, I don't owe you anything!"

The door sighed deeply "Yes, but you acquired me from Mr. Joe Chip, who had run up quite a big outstanding bill with every door in the city. As part of a door led crackdown on financial crime Mr. Chip's comings and goings were relegated to a pay as you come and go basis, and you, as part of your purchase of this door from Mr. Chip (or perhaps Mr. Chips estate I don't have all the paperwork) will have to pay as you come and go as well. It's all in the contract"

"Oh yeah, well I got that contract right here!" Johnny was nothing if not organized, he pulled the eink contract out from a nearby cupboard.

At first it was difficult to find the relevant section, as the parts about regarding assumption of previous owner's debts were by default toggled shut and whoever had implemented the contract had decided to make the toggling element a very small dot that looked like it could be a speck of dust attached to the electronic paper. But finally after poking at the dot for some minutes he managed to toggle it, displaying the legalese hidden within, sure enough; payment to his door for opening and shutting constituted a mandatory fee.

"You discover I'm right," the door said. It sounded smug.

walrus013• 5 years ago

Hiro Protagonist and Vitaly Chernobyl, roommates, are chilling out in their home, a spacious 20-by-30 in a U-Stor-It in Inglewood, California. The room has a concrete slab floor, corrugated steel walls separating it from the neighboring units, and-this is a mark of distinction and luxury -- a roll-up steel door that faces northwest, giving them a few red rays at times like this, when the sun is setting over LAX. From time to time, a 777 or a Sukhoi/Kawasaki Hypersonic Transport will taxi in front of the sun and block the sunset with its rudder, or just mangle the red light with its jet exhaust, braiding the parallel rays into a dappled pattern on the wall.But there are worse places to live.

There are much worse places right here in this U-Stor-It. Only the big units like this one have their own doors. Most ofthem are accessed via a communal loading dock that leads to a maze of wide corrugated-steel hallways and freight elevators. These are slum housing, 5-by-lOs and 10-by-lOs where Yanoama tribespersons cook beans and parboil fistfuls of coca leaves over heaps of burning lottery tickets.

It is whispered that in the old days, when the U-Stor-It was actually used for its intended purpose (namely, providing cheap extra storage space to Californians with too many material goods), certain entrepreneurs came to the front office, rented out 1O-by-lOs using fake IDs, filled them up with steel drums full of toxic chemical waste, and then abandoned them, leaving the problem for the U-Stor-It Corporation to handle. According to these rumors, U-Stor-It just padlocked those units and wrote them off. Now, the immigrants claim,certain units remain haunted by this chemical specter. It is a story they tell their children, to keep them from trying to break into padlocked units.

anigbrowl• 5 years ago

Foucault's nightmare, realized.

renewiltord6• 5 years ago

This is a great tool, honestly. The problem appears to be that the original owner passed on a restricted device to someone else while pretending it wasn't a restricted device. This is like if you sold a car with an ignition interlock device and somehow suckered the new owner.

The law will eat you alive (as it should) rather than the ignition interlock manufacturer. However, in India, the law is completely absent at best and an active tool of your enemies at its worst.

dataflow4• 5 years ago

It might have been a great tool to some extent but it's gone too far IMO. It's one thing to block non-safety-critical features of a device or make them annoying to use... it's something else to break functionality that people's lives might depend on. Block their ability to watch videos and install new apps and other stuff, OK, but to not even let them make a phone call? Should someone die because they didn't pay back $40 on your phone?

renewiltord6• 5 years ago

It's India. If you were going to die unless you make a call, you're going to die anyway because the other end is unlikely to answer fast enough.

In this case, this guy was going to be unable to do his job until he called from a borrowed phone (people do this all the time, did it myself when I had to make a call there once and my phone was borked).

alex_smart2• 5 years ago

However, in India, the law is completely absent at best and an active tool of your enemies at its worst.

Cries in Indian. :'(

walrus013• 5 years ago

This is basically the cellphone version of a GPS-enabled, LTE-connected ignition system connected tracking device in a car purchased from an American "buy here, pay here" used car lot.

https://www.youtube.com/watch?v=4U2eDJnwz_s

https://en.wikipedia.org/wiki/Buy_here,_pay_here

hellbannedguy• 5 years ago

This should be illegal. Now I’m in a bad mood.

Even if you have a judgment against you, you have rights.

Oh yea, never liked the ignition lock either, or the boot.

Make companies go through the court system if they have a problem with you.

vbezhenar• 5 years ago

It means that those companies just won't offer those phones for those people, end of story. Court system is too expensive, so its cost will be inside smartphone cost, so phones will not be affordable.

pydry• 5 years ago

This would be vastly better.

As it is customers are being teased into becoming reliant upon these phones before having the rug pulled from underneath them.

kergonath• 5 years ago

It’s always the same thing, from child labour to the 80 hours work week or the Victorian workhouses. Yes, some things need to be banned, even though some people are desperate enough to rely on them. We should not reinforce this reliance, but instead provide a better alternative.

anoncake• 5 years ago

So? Then people have to get phones they can afford.

alex_smart2• 5 years ago

the court system

You're assuming the existence of a functioning court system where you can hope to get justice in a reasonable time frame. Given that this happened in India, that is a very bold assumption indeed.

lifeisstillgood5• 5 years ago

Your rights under law matter.

I bang on about the idea of a MOOP - where our daily behaviour is monitored (by phones) and then can be used to improve our lives - from basic budgeting to helping us with communication styles and relationship advice (94% of husbands with marriages rated happy would stop now and not continue this argument. Press any key)

But to do that demands medical levels of trust around the behaviour data - a d that needs both law and culture to be relentlessly clear about the trust levels.

A leak of your argument rate with your kids should be seen as similar as a leak of your heart rate.

And because all these things are linked, perhaps your credit rating should be seen as protected as your medical records.

Anyway, this is a form of predatory lending - they cannot charge 1000% APR so charge it implicitly through the threat of losing a phone. Only the desperate will apply - which should be a very good reason for not giving the loan.

(Then again, perhaps putting the app out there is a good signal that the lender should go to jail immmediately and be banned from financial industry. )

robertlagrant2• 5 years ago

I think the loan rate is the only predatory thing here.

They're putting this app on phones for a reason: people would just keep the phones without paying and it's impossible to retrieve them cost-efficiently. Most services stop working if you stop paying.

lifeisstillgood5• 5 years ago

But a predatory loan is a predatory loan.

This is something about society's attitudes to protection of its citizens.

The short answer is I prefer Liberal to Libertarian. The long answer is probably a book length.

freebuju3• 5 years ago

Your argument totally ignores the fact that this pre-installed app reads the user's data and communications from any app they use on that device. So they are not only effectively losing their privacy, but the app is also surveiling them since it transmits the GPS location to the device owner/lenders.

There are also other human costs. E.g having your conversation on WhatsApp etc. being cut off midway due to a late repayment.

I'd argue the weight of this falls more on the compliance methods & tactics used than the loan financing rate itself.

Cederfjard• 5 years ago

relationship advice (94% of husbands with marriages rated happy would stop now and not continue this argument. Press any key)

The idea of interacting with people whose actions are governed by some computer (from some profit-driven company, no less) is deeply unsettling to me and I hope this concept will never see the light of day as an actual tool. I married my wife, not some algorithm.

lifeisstillgood5• 5 years ago

The point is to learn from the mistakes / success of others. And not from a profit driven company - see the medical level in f protection that i think we need for almost all data collected about us.

Data about us should be presumed protected at all times. Only if we allow its use for let's say well regulated research it will provide huge benefits. The obvious ones are medical (reactions to this drug and lifestyles) but just imagine the benefits of basic behaviour improvements on a scale of millions. More exercise, better relationship advice,

sleavey• 5 years ago

How is an app able to lock out the whole phone?

sneak4• 5 years ago

Android phones.

StavrosK2• 5 years ago

I can't help but feel that the freedom to modify a phone is being mentioned as a negative.

sneak4• 5 years ago

Reminder: if services like this are banned, the alternative remaining for the users is the same as if their phone were locked out: no phone.

This is a way of extending credit to the high-risk. Without a way of reducing that risk, the credit won't be extended, and they will be worse off overall.

eganist• 5 years ago

Considering our history of misrepresenting risk (2008), I'm not sure I agree. The alternative prior to lockouts was slimmer margins or higher rates over longer periods, not an absence of credit, because other controls to recoup losses still existed; tools like lockouts serve to extend margins in an economic environment that hyper-prioritizes growth, but there will always be companies willing to extend credit.

raverbashing2• 5 years ago

"But they wouldn't be able to afford it without this" is a textbook loan shark argument

What it does is encourage them to go for a phone they can't afford. They could buy a cheaper phone, a used one, save money, etc, instead. But showing off is better I guess

"Rim rental" repos are a booming business

Edit: even the article agrees with me: "For now, the phone remains unlocked... he doesn’t mind the surveillance app as long as he can keep using his phone. Anyway, he has his eyes on a new 5G phone"

sneak4• 5 years ago

What it does is make them go for a phone they can't afford.

I think perhaps you have misattributed the responsibility here. The thing that "makes" someone take out a loan is the loan customer.

superflit• 5 years ago

"What it does is make them go for a phone they can't afford. You can buy a cheaper phone, a used one, save money, etc. "

They Dont want a cheaper or used money or even save money. They want the "full social status" of a new brand phone.

In my country and others having a brand new phone has higher social status than having money in the bank or a car sometimes.

tener2• 5 years ago

Funny how Apple does similar thing when they think you owe them money. Sure, the phone is not in a total shutdown, but it is still crippled.

freebuju3• 5 years ago

Source for this?

tener2• 5 years ago

There you go: https://dcurt.is/apple-card-can-disable-your-icloud-account

HN discussion (17 days ago, 676 points, 302 comments): https://news.ycombinator.com/item?id=26310817

It appears as though charges from Apple are special, and if your account is not 100% current, Apple will quickly take drastic action.

babayega23• 5 years ago

Sometimes I understand the rationale here of such apps.

In Africa, many electrical utilities were failing to get consumers to pay on time electrical bills. That when we started implementing prepaid electricity meters: you estimate how much you will consume over the course of a month, you buy those kWh on a monthly basis. If they finish, the light goes out automatically.

Electrical utilities are now less dependent on the goodwill of the consumer to pay bills. And here in many african countries, there is no simple way to track a person in order to make him repay a debt.

Imagine peoples buying nice Samsung phones on a loan ( ex $560/phone is huge), how do you track them in order to get back your loan? Some hikes the price of calls and SMS, some do other things and finally other install a kill switch.

walrus013• 5 years ago

That when we started implementing prepaid electricity meters: you estimate how much you will consume over the course of a month, you buy those kWh on a monthly basis

These are a really old idea, there were coin operated electricity meters in the UK many years ago, in the 'everything is analog' era.

https://www.google.com/search?q=uk+electricity+meter+coin&cl...

mattmanser2• 5 years ago

Were? They still exist, my mate has one.

It got so full over lockdown he had to whack it to fit more pound coins in. Also, every now and then he moans about finding enough coins in this day and age.

I think most of those sort of meters are now prepay cards in the uk, but the coin ones still exist.

babayega23• 5 years ago

Indeed. In our country you just pay over your mobile phone (using USSD) and you get in return a token that you can type in the electricity meter and you've finished loading electricity for the next months

tinus_hn5• 5 years ago

The normal way to deal with this is to either not loan money to people that you don’t trust to pay back, or to account for the risk in interest.

Lending money to people and then strangulating them when they don’t pay is the way the mob works.

baxtr• 5 years ago

But is this really fair for those who pay? Selecting out high risks will benefit the majority of people with low or no risk because interest rates will be lower.

Side Note: That's the key reason you can't get your Ferrari easily insured with major car insurers... It is not impossible, of course, but it isn't as easy as with usual brands.

refurb4• 5 years ago

“Strangling them”?

You mean taking back the thing they aren’t paying for?

statstutor• 5 years ago

Electricity in the UK is provided in two ways - some pay at the end of the month on a contract basis, some pay via a pre-payment meter (on different terms - more expensive and more dependent on regular servicing).

Wealthy people typically get cheaper utilities with less hassle. People renting somewhere with a prepay meter don't have the same level of access (whether they make reliable payments, or not).

We might agree that it is reasonable to differentiate when it comes to private loans, but when it comes to utilities, this is pure discrimination.

valuearb• 5 years ago

Turning off your cell phone is strangulation now?

Counterpoint: this is a brilliant way to reduce risks and offer honest customers lower rates.

mnw21cam• 5 years ago

I lived in Kenya for a while (admittedly several decades ago). Typically what would happen was the electric company would send a letter with the month's bill out, and then the next day (before the letter arrived) they would send out a technician who would pull the main fuse out from the meter, cutting you off. Trying to argue the point ("You haven't paid your bill" - "We haven't received a bill") was futile. After this happened a few times, we just kept the gate locked.

babayega23• 5 years ago

Indeed. Some technicians got killed. But now, hacking the electricity meter is punishable by heavy fines defined by a special law. You get banned for never ever being again a client of the sole electric company in the country.

neiman• 5 years ago

I AirBnBed an apartment a little more than a year ago, from a super nice, even slightly naive, owners.

They instructed me to leave the apartment keys on the kitchen table when I departure, and leave the door unlocked. "You see", the explained, "it's a smart house. We can control everything from our phones! The door, lights, stove tv -- everything!".

They were proud of how advanced they are (naive, as I said), while I was a bit freaked out they (or their kids) would play with stuff in the apartment during my stay.

mschuster912• 5 years ago

What keeps users from rooting the phone and deleting the "undeletable" app? It's installed at point of sale which means a factory reset should get rid of it.

The only exception may be Samsung's Knoxguard in its newest iterations which requires the device to "phone home" to Samsung to unlock the bootloader.

rini172• 5 years ago

Usually connection to computer is required (which they might not even have), then finding the right software (if you don't know exactly what you want then it's 99% chance of malware) which is usually nontrivial to use and not in native language.

mschuster912• 5 years ago

A perfect business model for "second hand" phone shops. I 'member during the old days of SIM locked phones a lot of these would offer unlocking under the table or provide you with solder-'em-yourself kits to do it yourself.

ajmadesc• 5 years ago

I can imagine a world where hacking that phone which 'isn't your property' is illegal and not worth the risk. Capital runs the gov bruv

ab_testing• 5 years ago

I think the article clearly states the reason for this.

There is a lack of formal credit scores or collateral making it difficult to assess loan-worthiness. Combine that with the fact that a disabled phone is no good for the owner or the lender, there is a substantial risk involved. And interest rates are nothing but a measure of risk premium.

freebuju3• 5 years ago

This article reads like an episode of Black Mirror. What is wrong with India...

This whole practice is despicable. And extremely predatory on the uneducated masses. Wouldn't be too far-fetched to see shady companies buying this data and re-targeting the same customers with other dubious financial products and loans.

Lauded for being one of the most progressive countries in internet infrastructure & access, the government of India is sleeping on this if not outright colluding with these unscrupulous corporate scammers.

bongoman37• 5 years ago

People who think this should be banned don't realize that people who really want the phone can get into even worse arrangements to directly get cash to get the devices. In India it is not uncommon for poor people to get loans that are at about 10-20% per day interest rate. The incentives and dynamics behind this are quite interesting but suffice it to say that just banning this is unlikely to improve the conditions of the people who want these devices and may even make it worse.

gher-shyu3i7• 5 years ago

When are we going to realize that any lending with expectation of profit (usury, interest, etc.) is predatory? There's a reason that these loans are prohibited in Islam, Judaism, and Christianity. Yet, we keep thinking that there can exist the phenomenon of lending for profit, and keep a society going without its destructive behaviors. Time and time again it's shown to be parasitic and causes huge inequality.

hawk_2• 5 years ago

i am pretty sure loans weren't prohibited in Judaism, there's a reason for that whole history of money lending in europe predominantly done by the Jews.

as for interest always bring predatory - like many things it's not so black and white. it's about moderation and regulation.

gher-shyu3i7• 5 years ago

It's prohibited for Jews to lend each other money with interest, ask any practicing Jew today. It seems to be a "loophole" that they're claiming that it only applies to lending money to each other, but not to gentiles.

Interest cannot be done in moderation, we've seen those attempts countless times, yet it always gets out of control. It's not dissimilar with drinking. Some people may drink in moderation, but there will always be drunk driving and homicides and many other terrible things caused by drinking. No way around it with moderation.

MeinBlutIstBlau4• 5 years ago

Lending is predatory. That doesn't make it unethical. Is it unethical for a lion to kill a baby zebra that couldn't get away? No that's the nature of the beast. People need to step outside this fantasy world that everyone can be winners/successful. Newsflash, they can't.

We can have compassion for those that fail, hence why the US has some of the most relaxed and borrower favorable bankruptcy laws. People act as though bankruptcy is like suicide. It's not. You just aren't trusted with other people's money for 7 years. You can very easily keep your house if you have a good relationship with the bank (which happens more than you think). Banks hate foreclosure. They'd rather risk some missed payments here and there or refinance than foreclose.

The system isn't perfect. But outright decrying it because the precepts of old religions where people told us we shouldn't eat shellfish or pork for arbitrary reasons is no basis in rational policy making. Should we base our policy of slavery on Muhammad's opinion about having slaves as long as they aren't Muslim? Like c'mon...these theologies do not contain the end all be all to the way life works.

gher-shyu3i7• 5 years ago

Is it unethical for a lion to kill a baby zebra that couldn't get away?

Under an atheistic materialistic world view, we can kill off the entire population of the earth and it's all the same. However, we're not animals. Actually, even animals don't do that.

People need to step outside this fantasy world that everyone can be winners/successful.

That's not what we're saying. Islam never says that everyone is going to be equally financially successful. As a matter of fact, people with wealth are going to be accountable for how they gained their wealth, and where they spent it, it's a test. That's why the poor enter Heaven before the wealthy, because they have less to be accountable for.

Islam places barriers on exceedingly immoral and parasitic and destructive practices, like lending money with interest, fornication, drinking, etc., and everything else within those bounds is a fair game. That's why we witnessed the immense and unprecedented growth of a religion and population, reaching the Islamic Golden Age when the rules of Islam were generally being applied correctly (at least much better than today).

We can have compassion for those that fail

If that's the argument, then Islam has even more compassion. Lend the needy money *without* interest, and give them charity (Zakat and Sadaqah), and more. We already know that there was a time in Iraq where there were no people left to take charity as people gave their Zakat and Sadaqah.

Should we base our policy of slavery on Muhammad's (ﷺ) opinion about having slaves as long as they aren't Muslim

I think you have a misconception. Having or not having slaves under Islam has nothing to do with the religion of the slave.

told us we shouldn't eat shellfish or pork for arbitrary reasons is no basis in rational policy making

We don't follow a religion because it tells us not to eat pork or shellfish. We don't determine the truth of a religion due to those same factors. It's the other way around, once it is determined that the religion is True, then we follow its rulings and teachings.

Like c'mon...these theologies do not contain the end all be all to the way life works.

Depends on which theologies you're talking about. It's a fallacy to group all religions under one umbrella then toss them out altogether as equally false. Islam has proven to be a system that has brought up a culture out of nothing, and went on to give us the Islamic Golden Age, among many other beautiful things.

btheshoe• 5 years ago

yes, because what religions do and don't prohibit is such a great way of measuring what's right and wrong

our entire economy runs off lending and debt. get rid of it and you make the world worse for everyone.

gher-shyu3i7• 5 years ago

It's a fallacy to discard certain (or all) religious practices as outdated. Furthermore the notions of right and wrong do not exist in an atheistic materialistic world view. This is by admission of well known atheist figures.

Today's economy runs off of lending, yet people keep crying from the inequality and other messes we're in, and keep trying to patch them up without success, and that's because the root is rotten, so it will never be fixed. We can learn a few things from economies that didn't run off of lending. See: Islam, and read about the Islamic Golden Age. We already know that there was a time in Iraq where there were no people left to take charity because everyone was well off and honest. That would never happen in an economy based on lending.

aethertron• 5 years ago

In this story, wasn't Zameer was defrauded into paying for a phone that the seller had no right to sell? The seller didn't completely own it. So Zameer isn't really the owner now.

Despite that, I think it would have been cool for Zameer to appropriate this phone, pay absolutely zero part of the loan, and hack it to remove the DRM. I hope lots of people in India learn how to do this and make this scam go extinct, and make a handsome profit.

throwaway210222• 5 years ago

For those who get offended by contracts between consenting adults, feast yourself on 'Airtime credit'.

You can 'borrow' airtime from the operator and pay it back (at a premium of course) when you next recharge.

https://www.airvantage.co.za/

dannymayers• 5 years ago

Well it's not all true. If you've had a bad app experience, don't extend it to all apps in the playmarket. In any case, if the application does not triple you, you can contact a reliable service and get a loan via NorthnLoans. I advise you to read before writing anything.

Lenders are turning to coercive loan apps that shut down smartphones

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