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Lending app publicly shames you when you’re late on loan payment (restofworld.org)
96 points by danso on Sept 6, 2020 | hide | past | favorite | 77 comments

Just a text message? Psh.

In China some microlenders will accept nude pictures as collateral – & release them publicly if you don't pay.


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.

Consider donating to Electronic Frontier Foundation if you still want to fight the dystopia: https://eff.org

What has the EFF done recently in China?

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

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.

Surely if you send naked pictures of yourself to a lender you know what’s going to happen if you don’t pay up...

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.

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.

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.

This argument doesn’t work if the topic is eating or sleeping.

The topic is not eating nor sleeping, though. We are not talking about the USA, but a country with social safety system. Nobody in China has to go to microlenders to eat and sleep.

As an unattractive person, I think it's nice that I too can now monetize my nudes!

I would not want to be a DB administrator in that organisation...

> apply for loan

> use deepfake pics as collateral (preferably ones where the "body" has identifying characteristics that's different than yours so you can repudiate it, eg. birth marks, tattoos)

> ???

> profit!

Nah, they specifically require showing your face the same as the photo on your National ID, and you are required to hold your national ID as part of the nude photo.

Deepfake whatever you want, it's still your face.

>Deepfake whatever you want, it's still your face.

See part about the part about repudiation in my original comment.

Come to think of it, deepfaking your face onto someone else's body is probably the hard way. It's way easier to mutilate (ie. making subtle but plausible edits) a real nude of yourself so you can repudiate it later.

You then have to reveal those parts of your body unedited, though. And in sufficient detail to convince people that these new photos are the unedited ones.

If you really need to convince some small number of people that the pictures are fake, you can reveal yourself to them in private.

But I can't think of many scenarios in which either of these approaches leave you better off than just having real nudes made public in the first place.

>You then have to reveal those parts of your body unedited, though. And in sufficient detail to convince people that these new photos are the unedited ones.

That doesn't seem too hard. The edits can be made to places that you can "safely" show to people (eg. upper arm or belly area). You can also make yourself look thinner/fatter/more muscular (body only, not face) so your friends/family will immediately recognize it's not you.

Isn’t it also roughly as embarrassing and damaging to have extremely believable fake nude photos of yourself on the internet?

The problem here is that naive people think organizations which essentially have a blackmail model to recover dues will stick to purely legal means when they discover you have stiffed them.

It seems relatively absurd to assume you could plausibly replace the subject of a photograph only to be stymied by the inability to do the same to a small photo on a card.

Unless the illegal loan outfit also has access to the national id photo database which seems rather unlikely even by China standards.

If I was the bank mentioned in the article I would create deepfakes of defaulting clients myself. The real danger is sending the collateral to the right people. Your boss, parents or friends are supposed to see the collateral. People looking for free stuff on the internet will think you're ugly or attractive and move on.

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.


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

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.

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.

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.

“Lenders must be made whole, and can take any step necessary to be made whole” is an extremely common and extremely weird point of view.

If one believes in the free market, shouldn’t one also believe that bad lenders who give out risky loans should face the risk of not getting repaid?

In the United States we have laws against third-party disclosure of debt.

I’ve loaned many friends large amounts of money over the years, and never once has anyone repaid me, and that’s ok. When I make a loan it’s with no expectation of repayment.

I honestly don’t understand people who think it’s fair or right to ruin someone’s life just because you have power over them. It’s also possible to be kind, and generous, and those usually repay greater dividends than any interest rate.

No, I would not ruin someone's life over a loan, that's why I said "depending on the situation".

I've also given away lage amounts of money - not as loans - over the years without the expectation of being repaid, so it's not a question of generosity.

Simply put, it is not OK to promise someone to payback within X time and not do it. If you are not sure you would be able to pay back, make it clear upfront. If something out of your control happens, it's OK. I agree with you that in that case we should be nice to each other and help each other.

Also I'm not considering interest rates here, just paying back the loan as is.

I guess it’s down to moral absolutionism and universality - and while you may not be the shark your initial post suggested, I’m afraid to say many are.

I would always expect myself to repay a loan, on or ahead of time.

I don’t expect the same of others, however - I think most people, when taking a loan, expect and intend to pay it back - but life is not predictable, and their circumstances change.

The thing is, being chased over a small amount of money is enough to ruin someone’s life, at least in the here and now - I’ve seen people in desperate situations due to debt, and I don’t mean penury, I mean guilt, remorse, feelings of failure.

So, for me, it’s just not worth it. If someone pays me back, which has happened, then I’m happy, but I’ll never pursue a debt. They know they owe me. That’s enough. Don’t need to go piling the guilt on.

In terms of how this is transferrable to reality, it’d be interesting to see how incentives rather than disincentives might work in a lending situation.

I really respect your attitude.

I haven't been in a desperate need for a loan, nor seen people feeling the guilt of failing to pay back, so it's hard for me to relate. It's helpful to learn about it.

> it’d be interesting to see how incentives rather than disincentives might work in a lending situation

What kind of incentives might work here? I thought about a public trust score (some kind of "karma") that is attributed to people if they pay back succussfully. Not sure how well it would work in practice.

The whole karma thing is an odd one. I look at something like the social credit systems in China with some trepidation, as the power in the instrument is immense - but at the same time think the concept as a whole potentially has legs. Why not reward people for good behaviour? Be monetarily poor but of good reputation, xyz is open to you. Be rich and of poor reputation, then those same possibilities are closed.

I suppose the problem arises when you start trying to arbitrate good and bad, and who gets to be that arbiter. If you boil it away to purely a system for rewarding actions around financial credit, then you have... credit scores.

> Why would this be considered unethical, while not paying back would not be considered theft?

So you get that not paying it back is not theft, yet you think the behavior outlined in the article is ethical?

There's so many layers of unethicality it's insane.

The idea that these people's privacy is being invaded to such a degree their entire social graph is stored on these servers, the fact these people understand what they're doing is bad insofar as to say they stopped but continue anyways, the kinds of terms these loans provide with such flimsy "collateral", the use of intimidation to resolve a debt?, the psychological effects of treating people like these companies are?

> The idea that they pay back in social credit seems like a good solution to prevent this from happening again with others.

Did you read the article?

(Ignoring the ridiculous of acting like it's some altruistic endeavor to try and "save others" from getting taking advantage of...)

It doesn't even prevent it from happening to them let alone someone else!

They go through these people's contacts, start harassing them and their acquaintances, and the people still end up not paying, and in fact they end up inviting people who actively plan to game their "collateral" with false info.

> So you get that not paying it back is not theft

Not paying back when you have the capacity to do so is theft.

I don't agree with the harassment this company is doing, that's unethical. I just agree with the general idea that social pressure can be an effective measure to make loans working. How to implement that in practice should take in consideration a lot of exceptions and corner cases.

No it isn’t. It’s just doing business see https://www.nolo.com/legal-encyclopedia/whats-the-difference... you can walk away from a mortgage and lenders are not allowed to go after personal assets.

> Not paying back when you have the capacity to do so is theft.

No, it's breach of contract, not theft. The lenders gave the money voluntarily (expecting more money in return), it wasn't taken from them. It's obviously not theft.

> 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.

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

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

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).

I've heard of Tanda which sounds very similar: https://www.thebalance.com/how-do-tandas-work-4582180

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

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

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.

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

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

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.

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.

A court mandating a proportion of your salary be diverted to repay debt is effectively a debtors prison.

Except, you know, for the whole prison part.

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.

In Ireland the judgement details (i.e. your name) get printed in Stubbs' Gazette.


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.

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

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

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?

> “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.

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.

>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...

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.


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

The longer the debt remains outstanding, the more the lender can collect due to accumulating interest. You almost would want to avoid the peer pressure, so long as some sort of payment is regularly made.

Right, in a lot of developing parts of the world, the concept of social credit is huge. Your ability to succeed in life is far more dependent on who you know that trusts you, than your own skills as an individual.

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

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

Along with all of the obvious badness, this simply seems like a terrible business model. It's a gun with one bullet.

Ultimately the goal of collections, is to collect the money. After you've shot your wad, why would I ever pay you back?

After 2-3 stories like this, why would anyone ever borrow? One of the hardest things with consumer credit is customer acquisition, and as OKash gains this reputation, they will only attract the most desperate, least likely to ever repay customers.

I would expect the opposite to be true; if you are known to offer good rates but with onerous consequences, then your counterparties should self-select to be those who are likely to repay. Lower rates are simply your CAC.

Except right in the article we see that people realize the system is easily gamed such that the consequences are trivial, causing the opposite effect.

Not to mention the proof in the pudding of their credit losses...

I guess you would be surprised at the amount of people who borrow from people with an actual gun. The short explanation is that some people are really desperate for money right now.

Not sure how likely someone committing mass murder over debt is...

Tax liabilities was enough to set one guy over the edge. People don't like feeling backed into a corner, and some people respond with unfathomable violence.


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.

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?

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.

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.

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.

There is probably a human in the loop that estimates the value of your contact list.

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