Police step up crackdown on illegal online lending companies
Jakarta. The Jakarta Police Department carried out one of their largest raids on illegal online lending operations this year, following instructions from President Joko “Jokowi” Widodo to curb the predatory lending practices that are affecting the country’s legitimate and growing fintech lending industry, valued at $ 18 a year. Undermined $ 4 billion.
Chief comm. Central Jakarta Metro Police chief Hengki Haryadi said Thursday that they raided an illegal online loan syndication office in Cengkareng, West Jakarta, the day before.
Police arrested up to 56 employees from the company’s payment and clearing department for questioning. They also confiscated possible evidence, including 52 employees’ computers and 56 cell phones.
“We followed up the report with our results and as a result found a credit bureau in Cengkareng, West Jakarta,” said Hengki. After the Financial Services Authority (OJK) confirmed that the lending company was illegal, the police carried out the raid.
“We secured some evidence and interviewed dozens of people working at the loan syndicate offices,” he continued.
The Central Jakarta Metro Police are continuing to investigate the case to find the owner of the illegal credit company and will provide further details once the investigation is completed.
The illegal online lending business has grown exponentially over the past two years, thanks to the growing popularity of financial technology apps during the pandemic. The illegal operators promise unsuspecting customers, who often lack financial literacy, often a slight shame.
However, the loan is often associated with a high interest rate that keeps its customers trapped in insurmountable debt. When the customers cannot pay, the illegal lenders often use violent and abusive tactics to demand payments.
The practice was so severe that some of its customers committed suicide. Earlier this week, a man in Bekasi, West Java, jumped to his death from the rooftop of a mall after discovering he was unable to pay debts on illegal online lending.
So serious was the problem that President Jokowi felt compelled to act. He urged law enforcement agencies to step up surveillance of illegal lending practices.
“I have received reports that there have been many fraudulent and criminal acts. I have heard that disadvantaged people are being deceived, trapped in high interest rates by online loan companies, and pressured in various ways to repay their loans, ”Jokowi said in his speech at the OJK Virtual Innovation Day on Monday.
Jokowi said the rapid evolution of digital finance needs to be sustained, monitored and well supported in order to achieve healthy growth for the economy.
According to the president, the development of financial technology must also build a digital financial ecosystem that is strong, sustainable and responsible. It must also provide risk mitigation, taking into account possible issues (both legal and social), in order to avoid serious losses and increase protection for the community.
“If we control it quickly and appropriately, Indonesia has great potential to become a digital giant after China and India and become the seventh largest economy in 2030,” he said.
Undermining the fintech industry
Chief comm. Ahmad Ramadhan, the head of the public information department of the National Police, said his office is currently focused on rooting out illegal online lending practices.
As of October, the National Police Headquarters had processed 371 cases of illicit lending companies based on reports from the public and the cyber police patrol. Of these, 91 cases have been brought to court while the rest are still under investigation.
“Almost all victims of this illegal loan do not understand the practice of online loan fraud,” said Ahmad.
“So preventive measures are crucial. Together with other actors, the police continue to ensure that the public understands so that they do not fall victim to illegal lending, ”said Ahmad in the program Zooming with Primus, which was broadcast live on Beritasatu TV on Thursday.
Andi Taufan, public relations director for Indonesia’s Joint Funding Fintech Association (AFPI), said illegal online lending firms not only harmed the victims, but also harmed the financial technology industry. Their worrying practices could undermine public confidence in financial services, Andi said.
“What the illegal lenders are doing is very worrying and damaging to the fintech lending industry,” Andi said.
“As a legal fintech industry, we have paid out loans totaling 260 trillion rupees ($ 18.4 billion) to 66 million people. In fact, there are bad loans around 1.7 percent, but the benefits are far greater for promoting financial inclusion, supporting MSMEs, and being productive. “Businesses,” he said.
According to AFPI research, many people fall victim to illegal lending because they do not know it is illegal. Then there is an urgent need given the economic difficulties caused by the pandemic.
“Many borrow without thinking about how to pay for it. It is a challenge for all of us to educate the public to be more careful and vigilant when they receive offers of illegal loans,” Andi said.