Undeletable Coercive Loan Apps First Hobble Then Shut Down Your Smartphone If You Fall Behind On Repayments

from the still-think-you-own-your-hardware? dept

The modern smartphone is a technological wonder, cramming into its compact form factor multiple functions -- phone, pager, computer, camera, calculator, diary, multimedia player, radio, TV, clock, maps, GPS, voice recorder, eBook reader, gaming device, WiFi hotspot, flashlight etc. etc. -- that required over a dozen separate devices a couple of decades ago. No wonder, then, that most people want one, and would like to buy a model that offers all these features. However, in many parts of the world, the price of a good smartphone represents a big chunk of their annual wages. The obvious solution is to take out a loan, but that typically requires a credit rating, and many people in those countries lack a credit history, and may not have a bank account. To get around that problem, companies have come up with a new kind of smart loan for the "unbanked", as they are known. A fascinating article on the Rest of the World site, about the Indian Datacultr app, explains how the system works:

the easiest way for retailers and online stores to get high-end devices into working-class people's pockets has been through a new method of lending: collateralizing smartphones. Vendors are selling smartphones to first-time borrowers on high-interest payment plans financed by loan companies, but only after users install an undeletable app at the point of sale. The apps can then monitor repayment behavior throughout the duration of the loan. One late payment leads to instant blocking of the phone, rendering it useless. For loan providers and smartphone sellers, this form of lending opens their products to a new class of consumers. But users purchasing phones on loan are bearing the brunt of the coercive repayment tactics built into their devices.

The lack of formal credit scores is addressed by using the undeletable loan app to spy on the smartphone user. By looking at how people are using the smartphone, and accessing their texts, images and location, the app can gauge how likely the borrower is to default on the loan. To prevent that, software like the Datacultr app uses "nudges" of increasing severity:

The app starts by sending audiovisual prompts in regional languages as reminders. If the user misses their first repayment, it forcefully changes the wallpaper on their cellphones. If Datacultr's data scrape reveals a user to be a prolific selfie-taker, for instance, the app will send notifications every time the camera function is opened. If the user continues to default on the loan, frequently used messaging and social apps like Facebook or Instagram are progressively blocked, severely restricting the use of the device and ultimately shutting down all of the phone's functionalities.

It's not just India where these loan apps are being rolled out. The Rest of the World article says that the US company PayJoy has licensed its smartphone locking technology to lenders in over 20 countries, for example in South America and Africa. Google, too, is active in Africa with its own app called "Device Lock Controller".

Although "collateralizing smartphones" 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 the nudges and shutdowns. Secondly, the approach requires people to give access to personal files on their smartphone in order to assess their creditworthiness in real time. In other words, they must give up their privacy in return for the loan.

Finally, it's worth noting that the use of undeletable apps that can take over control of the smartphone at any time means that people don't fully own their device. That's not a new problem: Techdirt was writing about it back in 2011. And in 2014 the New York Times noted that companies lending money for cars required starter interruption devices to be fitted that could immobilize the vehicle if people fell behind on repayments. What's new is that nowadays all that is required is that most mundane of 21st-century artifacts -- a smartphone app -- which not only watches you constantly, but can punish you for "bad" behavior with a variety of tailor-made digital tortures.

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


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  • identicon
    Anonymous Coward, 1 Apr 2021 @ 12:30pm

    I question just how undeleteable any app really is with physical access to the phone.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 1 Apr 2021 @ 3:50pm

      Re:

      Well, the actual target market, extremely low income people, isn't going to have the knowledge or equipment to delete the app.

      However, their brother's son's co-worker's sister probably knows a guy who can transfer the app to a VM on a computer and keep it running via a bot, while removing it from the actual phone.

      Or possibly even hire someone to run the app on a cheaper phone pretending to be the feature phone.

      Alternatively, you're going to see all these people supplementing their income to keep their phone active by sending emails to Americans.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 1 Apr 2021 @ 8:13pm

        Re: Re:

        However, their brother's son's co-worker's sister probably knows a guy who can transfer the app to a VM on a computer and keep it running via a bot, while removing it from the actual phone.

        This sounds a hell of a lot like a Cory Doctorow story, something that would fit right into "Radicalized" (see Unauthorized Bread).

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 1 Apr 2021 @ 12:32pm

    Dumb idea but sadly technically an improvement.

    The whole concept is poorly conceived the least or which is the fact thieves could de-app it with an image reset and if they meddled with the image remove it there and then reset. Seriously why the fuck is a lack of a credit score taken as an excuse to start acting like a dystopia is a great idea?

    Sadly unlike other times at least here would have a reason to not own their phone - it is somebody else's collateral until paid off. Which is related to some requirements for wireless companies to unlock any installment paid phones on last payment/on request.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 1 Apr 2021 @ 12:43pm

      Re: Dumb idea but sadly technically an improvement.

      Seriously why the fuck is a lack of a credit score taken as an excuse to start acting like a dystopia is a great idea?

      It isn't. Starting, that is. Credit scores are already dystopian.

      reply to this | link to this | view in chronology ]

    • icon
      R.H. (profile), 1 Apr 2021 @ 3:23pm

      Re: Dumb idea but sadly technically an improvement.

      Oddly enough, your last request seems to already be happening. When I paid off my Galaxy S10+ early, Sprint automatically SIM-unlocked it. I didn't even notice that they'd done so until I was uninstalling apps that I didn't need anymore and I noticed that I could uninstall the Sprint apps that were pre-installed.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Apr 2021 @ 7:12am

      Re: Dumb idea but sadly technically an improvement.

      Things with such high privacy implications shouldn't be allowed for use as collateral.

      It's the equivalent to requiring a jailer, livestreaming everything you do and sending the footage to the bank, to follow you everywhere* for getting a home or vehicle loan.

      Then again, the USofA is no better. Employers love putting things on their employee's personal phones to constantly track and spy on them in exchange for the "privilege" of working for said employers.

      *Yes, everywhere. Even the toliet. Especially in this case. After all that tends to be the place smartphones are used the most.

      reply to this | link to this | view in chronology ]

  • icon
    Koby (profile), 1 Apr 2021 @ 12:45pm

    Why Pay More?

    Just as there are a number of companies that claim they will help consumers to get out of debt, perhaps an industry will be created that works to jailbreak a borrower's phone and remove this supposedly unremovable app. Similar to tech repair shops, if it costs less to fix than the cost of the loan, then it could become a profitable model. Hopefully this threat by itself will limit the loan sharks to small balance amounts that don't ruin people's lives with their usurious rates.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Apr 2021 @ 7:17am

      Re: Why Pay More?

      To reuse your question...

      Why should an industry need to exist to remove these apps in the first place?

      Why should people have to pay more just to regain their privacy that shouldn't have been taken from them in the first place?

      Industry isn't the answer to societal wrongs. Regulation to protect society from those who would abuse it, is.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 2 Apr 2021 @ 7:31am

      Re: Why Pay More?

      perhaps an industry will be created that works to jailbreak a borrower's phone and remove this supposedly unremovable app.

      My guess is that this would violate the terms of the loan, triggering demands for immediate repayment from the borrowers (in practice, returning the phone, because who's borrowing money for a phone they can afford?) and lawsuits for the jailbreaking company.

      reply to this | link to this | view in chronology ]

  • icon
    GHB (profile), 1 Apr 2021 @ 2:09pm

    This is VERY comparable to malware, especially vigilatae-ware

    I used the term “vigilante-ware” on any software that uses intrusive and aggressive acts on the user's device, such as Leemena's Sonic Gather Battle DRM and FlightSimLabs. I think I seen something like this on reddit on assholedesign, asking a subscription of some sorts, and forces you on that screen when you try to use other apps.

    I'm sure malicious hackers WILL abuse this.

    reply to this | link to this | view in chronology ]

  • identicon
    Pixelation, 1 Apr 2021 @ 2:29pm

    Simple answer

    Hey Kamal, can I borrow your phone for a little while?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 1 Apr 2021 @ 7:18pm

    So much room for abuse...

    • "Pray we don't alter the terms any further"
    • "Sorry, we have no record of that payment"
    • "It was your own fault that your job relied on your phone"
    • "You agreed to those extra ads by accepting the phone"
    • "No, sir. No security flaws in our software. Those are a feature."

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Apr 2021 @ 6:07am

    Correct - if you have a loan, you don't own the item.

    This article is absolutely correct. The people making payments for their phone don't own it. In the USA, if you are making installment payments on a vehicle, who has the title? BINGO! The finance company has the title until you pay off your loan. If you miss payments, the finance company can reposses your vehicle. What is the difference in this case?

    reply to this | link to this | view in chronology ]

    • identicon
      Xenocrates, 3 Apr 2021 @ 8:47am

      Re: Correct - if you have a loan, you don't own the item.

      Not true. I hold the title and registration on my car. However, the loaning bank has a right to my car should I default, which is known as a lien. I still have ownership and rights, they are merely entitled to receive the value of the lien, should I transfer the vehicle, and demand repayment according to our agreement.

      reply to this | link to this | view in chronology ]

  • identicon
    sophocles, 2 Apr 2021 @ 8:59am

    it's a coercive use of an interesting tweak - deeply branded cellphones.
    i used a hotel-owned cellphone on vacation a few years ago in Lisbon - i forget the details, but the phone allowed a number of free minutes, browsing, etc and made my visit much more convenient. as a tech experiment, i tried to find ways to reboot it in an unlocked mode; i think there was some ROM customization to prevent that bypass.
    hammers can be used to drive nails or hit people.

    reply to this | link to this | view in chronology ]

  • icon
    Thad (profile), 2 Apr 2021 @ 11:20am

    "Undeletable" sounds like a challenge.

    reply to this | link to this | view in chronology ]

  • icon
    Beefcake (profile), 2 Apr 2021 @ 12:33pm

    It’s not all bad

    Sounds like the usury experience is really well thought out.

    reply to this | link to this | view in chronology ]


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