As loan apps have surged in popularity, providing users with quick access to small loans without traditional credit checks or collateral, concerns have been raised about the aggressive tactics employed by some apps to collect overdue payments. In response to these concerns, Google has announced an update to its "Financial Services" policy, effective May 31, 2023, to protect users from deceptive or harmful financial products and services.

Disturbing practices, such as violating user privacy, have come to light as some loan apps require access to phone contacts and personal information during the loan application process. If a user falls behind on payments, these apps may exploit this information to shame and embarrass them into paying up. Some have even resorted to contacting every person in a user's phone book to inform them of the user's unpaid loan.

These aggressive tactics often prove counterproductive, as they can exacerbate anxiety and stress, making it even more challenging for users to repay their debts. It should be noted that not all loan apps engage in these practices, with many responsible lenders prioritizing their customers' privacy and well-being.

To address these issues, Google's updated policy will prohibit personal loan apps from accessing user contacts or photos. The policy also introduces specific requirements for personal loan apps targeting users in the Philippines and select countries, including submitting country-specific licensing documentation to verify their ability to provide or facilitate personal loans.

The policy covers financial products and services for managing or investing money and cryptocurrencies. It requires apps to comply with state and local regulations for any targeted region or country. The updated policy maintains a ban on apps providing users the ability to trade binary options and mine cryptocurrencies on devices but allows apps that remotely manage cryptocurrency mining.
Personal loan apps, including those offering loans directly, lead generators, and those connecting consumers with third-party lenders, must be categorized as "Finance" and disclose information such as repayment period, maximum APR, and total loan cost. Apps offering short-term personal loans, requiring repayment in full within 60 days from the loan issue date, are not allowed. In the United States, apps for personal loans with an APR of 36% or higher are also prohibited.

The policy outlines additional requirements for personal loan apps in the Philippines, such as obtaining a SEC Registration Number and the Certificate of Authority (CA) Number from the Philippines Securities and Exchanges Commission (PSEC). Apps involved in lending-based crowdfunding activities must process transactions through PSEC-Registered CF Intermediaries.

This policy update is a significant step towards safeguarding consumers from harmful financial practices and ensuring data privacy in the rapidly growing personal loan app market. Users should exercise caution when using loan apps and know their rights and responsibilities when borrowing money.