Indonesian P2P Lender Modal Rakyat Being Sued Over Loan Default Allegations
by Fintech News Indonesia March 19, 2024Indonesian peer-to-peer lending platform Modal Rakyat is facing a lawsuit filed in the South Jakarta district court on 20 February.
According to a DealStreetAsia report, the P2P lender has been accused of defaulting on loans, putting the spotlight on its business practices amid the sector’s broader issues.
The complainant, a retail lender named Haryani, has alleged that despite assurances of insurance coverage for her loans, ranging from 70-95% of the principal, she encountered problems when the platform announced a restructuring due to a borrower’s failure to repay.
Modal Rakyat’s use of “wallet insurance” from PT Citra International Underwriters, which apparently provides only administrative services rather than direct protection of lender funds, has been a particular point of contention.
According to the lender’s legal representative, this form of insurance, which covered merely 10% of the total funds, falls short of the protections promised by the platform.
This restructuring came into question when it was revealed that while payments were still being made by the borrower, Modal Rakyat had deemed the debt as written off, leading to confusion and disputes over the insurance coverage’s effectiveness.
In response to these allegations, Modal Rakyat had reportedly pledged to respect the legal process and work towards resolving the dispute.
The company, which was founded in 2018 and has since processed over 546,000 loan applications, remains under scrutiny not only from the lawsuit but also from industry watchers and the Indonesian financial services authority, OJK.
OJK has engaged with Modal Rakyat concerning the lawsuit and is closely monitoring the situation to safeguard customer interests.
Featured image credit: Edited from Freepik
