
Lending app publicly shames you when you’re late on loan payment - danso
https://restofworld.org/2020/okash-microlending-public-shaming/
======
gojomo
Just 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-
chi...](https://www.vice.com/en_us/article/kzv38w/millennials-in-china-are-
using-nudes-to-secure-loans)

~~~
hn_throwaway_99
I remember being so full of optimism in the late 90s about all the stuff the
Internet would enable. Should have put "dystopia" higher on that list.

~~~
emteycz
Nobody is forcing you into this. That's what freedom is, and I bet that was
high on your list.

~~~
piva00
In your definition of freedom it will also require that every "free" member of
society is equally well informed to decide if a product or service will
negatively impact them or not. I venture to say that any societal structure
that depends on "everyone doing their part" is bound to fail.

You can't stand behind freedom to hide regulatory failures of predatory
players in a market in the real world.

~~~
emteycz
Sorry but again, this is not the USA, financial services are very regulated in
China (similarly as in Europe), they are forced to provide all information in
a very clear and understandable way and structure their products simply. A
person that does not understand that is not fit to function in a society as an
adult.

There were no regulatory failures nor predatory plays, just bad personal
decisions.

~~~
piva00
I live in Europe, in Sweden more specifically, and there is absolutely no way
a financial company could offer a product with a "blackmailing through your
nudes" collateral. If it's possible in China then you can't state that
financial services are "very regulated in China (similarly in Europe)".

And please, don't assume I'm American or that I posted coming from an American
perspective.

~~~
emteycz
You're right, and I agree that such collateral shouldn't be acceptable, but it
is not what I meant. In the 90's European microlenders utilized a complex web
of fees, rules and penalizations to grow the debt from few hundreds today's
Euros to thousands or dozens of thousands, ans in response the EU regulation
of financial services came to be. That is not possible in China, the
regulation regarding the structure of the product is very similar to Europe.

------
firefoxd
There 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
This 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
If 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.

~~~
imtringued
Lending is a business. Lenders defaulting on their loans is just business as
usual. It's about as surprising as hearing that water is wet. You have to
charge those who pay their loans back more if you want to break even. Shame
doesn't compensate for the lost money. It's more of a revenge thing e.g. you
borrow money from the mafia and they beat you up.

Riskier lenders are more likely to default so they get a higher interest rate
to compensate for the risk. A lot of these people shouldn't be allowed to get
a loan they can't pay back in the first place. If you are using an alternative
form of collateral such as "social credit" then you are doing so with the
intention of making it easier for people to get a loan even when it is certain
they can't pay it back with money alone.

The shaming is no longer a result of personal failure. The shaming is now the
cause of failure.

Think about it this way. The maximum amount of money you can pay back over 3
years is $3000 but you also have a reputation that is worth paying $500 for to
preserve it. So the maximum you can borrow is $3500. The bank will accept the
loan but you can't actually get the required amount. From a business
perspective the bank is paying your debt in exchange for a very odd form of
labor. It's just one step removed from indentured servitude.

~~~
RandoHolmes
No, it's more about making them care more about paying you back. I don't agree
with the practice, but lets not pretend that it's strictly about revenge
rather than motivating the person to pay the debt.

------
hardwaresofton
> 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
Oh my, this is (or was) the late great company that made the Opera browser.
How the mighty have fallen... :-(

~~~
hardwaresofton
Yeah I was going to put in a disparaging remark towards Opera browser in my
comment, but thought better of it.

------
wisty
I'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
I'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)

------
lmg643
technology recreates the town square of medieval times - publicly shame
delinquent borrowers - what amazing progress!

~~~
DeepThoughts
Next up: we’re disrupting finance by bringing back debtors prisons!

~~~
adrr
Still 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
Not paying your restaurant or gambling tab is indistinguishable from theft.

As far as I know you cannot go to prison for owed taxes.

~~~
adrr
Any 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.

~~~
cwhiz
The difference is knowing the costs ahead of time versus getting a bill and
being unable or unwilling to pay. Most post paid services, as you call it,
have unknown costs at the time of service. Not so for dining at a restaurant.

Not paying tax can’t land you in jail.

------
rsynnott
I’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.

~~~
BrianHenryIE
In 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)

------
langitbiru
Reading 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.

------
nateberkopec
Community lending in Africa (and the African diaspora) has a lot of history:
[https://thegrio.com/2011/05/20/sou-sou-black-immigrants-
brin...](https://thegrio.com/2011/05/20/sou-sou-black-immigrants-bring-
savings-club-stateside/)

Given how susu circles work, the article seems to just be describing a high
tech version of a thousands year old practice.

~~~
BoorishBears
Lol 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?

------
saagarjha
> “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.

------
exabrial
Yikes. 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.

------
nimbius
>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
Traditionally, 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/microc...](https://www.vox.com/future-
perfect/2019/1/15/18182167/microcredit-microfinance-poverty-grameen-bank-
yunus)

Control F “Grameen Bank”, although the entire piece is very informative on the
topic.

~~~
thoughtstheseus
Does it matter that the pressure is from software vs. people?

~~~
cortesoft
The pressure isn’t from the software, it is from the people the software sends
messages to.

------
wdb
Maybe 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.

------
2Gkashmiri
What 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?

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noobermin
Reading 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.

------
dheera
I 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
Yeah 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.

