Government's role in safeguarding citizens from illegal online loans

Government's role in safeguarding citizens from illegal online loans

Illustration - Victim of illegal online loan receives threats from the debt collector. (ANTARA/Laily Rachmawaty/aa/rst)

The community has recently become aware of the practice of illegal online lending. Some people were under the false assumption that online lending by financial technology (fintech) companies could help to solve their financial problems. However, on the contrary, the illegal practice of online lending actually harms society by insulting and threatening them.

These individuals behind the practice of illegal loan lending often operate under the garb of cooperative legal entities to persuade people facing financial difficulties.

Consequently, various social problems arise in the community. Some depressed victims cannot handle the pressure from debt collectors and ultimately decide to commit suicide.

To this end, the government's help is needed to protect the community against the threats and dangers of illegal online loans.


Related news: Govt to revoke permits of co-operatives operating illegal online loans

The Indonesian National Police (Polri) had also earlier stated that the trend of illegal loans was highly detrimental to the community.

Head of the Public Relations Division of Polri, Inspector General Dedi Prasetya, affirmed that the police had paid special attention to the illegal online loan collecting mode that was often conducted under threat.

They also manipulated customer photos to make them appear inappropriate and were then distributed to the customer's co-workers and family as a threat for them to immediately pay their debt.

The customers often became stressed, ill, and also committed suicide from not being able to handle the pressure, Prasetya pointed out.

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Taking action against the threat of illegal online loans is a form of affirmation and protection to victims from the government, especially from the police.

Director of Crime Enforcement of Special Economics from the National Police's Criminal Investigation Department (Bareskrim) Brigadier General Whisnu Hermawan Februanto remarked that a foreign national called WJ, alias JHN, was involved in the illegal loan case.

Through the payment gateway company called Flinpay and the Joint-Owned Cooperative called Inovasi Milik Bersama, the suspect recruited illegal loan lenders and established illegal savings and loan cooperatives.


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Police Report

Head of the Investment Surveillance Task Force from the Financial Services Authority (OJK), Tonggam L. Tobing noted that currently, 104 fintech companies had 772,534 accounts, with a total outstanding distribution of Rp26.098 trillion.

Tobing affirmed that the high number of online loan companies was owing to easy access to the website while the police had encountered difficulties in eradicating them since they had several servers stationed in foreign countries.

From the victims' perspective, the rise of illegal lending is due to their lack of understanding of the legality of the companies and their pressing financial needs.

Since 2018, the Task Force had terminated 3,631 illegal online loans. Tobing revealed the characteristics of illegal loans, such as not holding an official permit, no management identity, and clear office address, offered an easy lending process that only required an identity card, photo of the borrower, and an account number.

The illegal online loan also does not give clear information on the borrowing costs and the penalty. The companies also had access to the customers' phones.

To this end, Tobing provided tips to deal with online loans. He urged people to only borrow money from the fintech companies registered in OJK and to borrow according to their needs and abilities as well as the productive purposes.

For people already dealing with online loans, Tobing suggested to report the problems via email to waspadainvestasi@ojk.go.id. People having debt with online loans are not suggested to find a new loan to pay their earlier debt.

People, who received inappropriate threats from a debt collector, can block the number from where the threats were sent and inform all their contacts to ignore messages regarding their debt. Reporting the number of the debt collector to the police was also suggested.

Social observer Dr Devie Rahmawati noted that the reason behind people using illegal online loans was due to their increased needs with low income, excessive consumption of digital society, and their negligence and weak knowledge in the financial area.

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The removal of Cooperative Registration Number

Due to several illegal lending practices under cooperative names, the Ministry of Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) would delete and cancel the Cooperative Registration Number (NIK) owned by the Savings and Loan Cooperative that practiced illegal online loans.

Deputy for Cooperatives at the Ministry of Cooperatives and MSMEs, Ahmad Zabadi, spoke of his side having made serious efforts to combat the existence of illegal online loan practices that used the saving and loan cooperative as their guise.

These illegal practices can tarnish the positive image of cooperatives and reduce the level of public trust in cooperatives in Indonesia.

Moreover, the Ministry of Cooperatives and MSMEs had held a meeting with the Central Board of the Indonesian Notary Association (PP-INI) to not immediately issue a cooperative deed without clear verification.

This effort is a follow-up from the several notaries that authorized the deed of the Savings and Loan Cooperative that was later used for illegal online loan practices.Related news: DPD Speaker voices support for police crackdown on illegal loans

One notary was able to authorize eight to 40 establishment deeds from 2020 to 2021.

The Ministry of Communications and Informatics had also sent a letter to the Directorate General of Informatics Applications to adjust the new requirements for the saving and loan cooperative that had a permit as an electronic system operator (PSE).

This is in an accordance with the Regulation of the Minister of Communication and Informatics Number 5 of 2020 on the Private Scope of Electronic System Operators. The new regulation required the cooperatives to fulfill the permit if they are looking to operate as a PSE.

As regulated in Article 104, paragraph (2) of the Regulation of the Minister of Cooperatives and MSMEs Number 9 of 2018 on the Organization and Development of Cooperatives, it stated that "Cooperatives that organize savings and loan businesses are required to have a savings and loan business license issued by an authorized official".

Zabadi and his team had checked the One Office Building in South Jakarta used by approximately 20 Savings and Loans Cooperatives that conduct illegal online loan business practices. His side has also dispatched a team to search several virtual office buildings used by other Savings and Loan Cooperatives.


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His team had also investigated the Space Inc Building in West Jakarta and the Thamrin City Building in Central Jakarta.

The two locations were used as virtual office addresses by seven savings and loan cooperatives that conducted illegal online loan business practices.

Based on the results of the team's investigation of the location, information was obtained that some cooperatives had indeed rented a virtual office at that address but did not extend the rental period.

In addition, there were several illegal online loan companies that used fake addresses as their offices

Such facts call for the government's action to protect its people from the threat of illegal online loans.


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