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Draft Guidelines on ‘Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders’

Reserve Bank of India (RBI) has issued draft guidelines on digital lending for transparency in aggregation of loan products from multiple lenders.

What is the rationale behind the draft guidelines?

Many of the lending service providers (LSPs) offer aggregation services for loan products, wherein an LSP, or a Regulated Entity (RE) acting as an LSP, has outsourcing arrangements with several lenders and the Digital Lending App / Platform (DLA) of the LSP / RE matches the borrower to one of the lenders. In such cases, particularly where an LSP has arrangements with multiple lenders, identity of the potential lender to the borrower may not be known upfront to the borrower.

What are the draft guidelines for ensuring transparency in aggregation of loan products from multiple lenders?

With the objective of enabling the borrowers to have prior information about the potential lenders in order to make an informed decision, the REs are advised to ensure as under –

  • The LSP shall provide a digital view of all the loan offers available to the borrower, as per his / her requirements, from all the willing lenders with whom the LSP has arrangements with.
  • While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it shall follow a consistent approach in this regard, which shall be disclosed suitably on their website.
  • The digital view shall include the names of the REs extending the loan offer, amount and tenor of loan, the Annual Percentage Rate (APR) and other key terms and conditions in a way which enables the borrower to make a fair comparison between various offers. A link to the key facts statement (KFS) shall also be provided in respect of each of the REs.
  • The content displayed by the LSP shall be unbiased and shall not directly / indirectly promote or push a product of a particular RE, including by use of any practices or deceptive patterns, i.e., using ‘dark patterns’ designed to mislead borrowers into choosing a particular loan offer.

What is Annual Percentage Rate (APR)?

Annual Percentage Rate (APR) is the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility.

What is Key Facts Statement (KFS)?

Key Facts of a loan agreement between a RE / a group of REs and a borrower are legally significant and deterministic facts that satisfy basic information required to assist the borrower in taking an informed financial decision.

Key Facts Statement (KFS) is a statement of key facts of a loan agreement, in simple and easier to understand language, provided to the borrower in a standardised format.

What are dark patterns?

Dark patterns shall mean any practices or deceptive design pattern using user interface or user experience interactions on any platform that is designed to mislead or trick users to do something they originally did not intend or want to do, by subverting or impairing the consumer autonomy, decision making or choice, amounting to misleading advertisement or unfair trade practice or violation of consumer rights.


References

Government of India. (2023, November 30). 'Central Consumer Proptection Authority - Notification'. Retrieved from https://consumeraffairs.nic.in/sites/default/files/The%20Guidelines%20for%20Prevention%20and%20Regulation%20of%20Dark%20Patterns%2C%202023.pdf

Reserve Bank of India. (2024, April 26). 'Draft Guidelines on ‘Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders’'. Retrieved from https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4424

Reserve Bank of India. (2024, April 15). 'Key Facts Statement (KFS) for Loans & Advances'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12663&Mode=0

Reserve Vabk of India. (2024, April 26). 'RBI invites comments on the Draft Circular on “Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders”. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57791


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