Digital Lending Disputes: Common Problems and Modern Resolution Methods
A borrower sees an EMI deducted twice. Another gets recovery calls from a number the lender never disclosed. A third finds a loan on their credit report that they say they never took. These are everyday digital lending disputes in India, and most start as small complaints that become expensive because nobody owns them.
This guide covers what usually goes wrong, what the RBI expects from lenders, and how both borrowers and lenders can resolve these disputes without a long court process.
Common Problems Behind Digital Lending Disputes
Most borrower complaints fall into a few groups:
Unclear charges: processing fees, penal charges, or interest that differ from what the borrower understood at sign-up.
Recovery harassment: repeated calls, messages to contacts, or threats from collection agents.
Credit report errors: wrong DPD status, duplicate entries, or closed loans still showing as active.
Payment mismatches: repayments not credited, or auto-debits taken after closure.
Unauthorised or fraudulent loans: loans taken using misused KYC details.
Confusion over who the lender is: the app is run by a fintech, but the loan sits with a bank or NBFC.
That last point causes most of the delay. Borrowers complain to the app, the app points to the NBFC, and the NBFC says the issue is with the platform.
What the RBI Expects From Lenders
Under the RBI (Digital Lending) Directions, 2025, issued on 8 May 2025, regulated entities (banks and NBFCs) carry the responsibility for digital lending, even when a lending service provider (LSP) runs the app. Key points relevant to disputes:
Key Fact Statement (KFS): the borrower must receive it before the contract is executed. It includes the APR, recovery mechanism, grievance officer details, and the cooling-off period.
Cooling-off period: the borrower gets an explicit option to exit the loan by repaying principal and proportionate APR, without penalty.
Nodal grievance redressal officer: the lender and its LSPs must have one for digital lending complaints.
Responsibility for grievances: it stays with the regulated entity, whatever the LSP’s role.
These are regulatory requirements for regulated entities. They are not a guarantee that every complaint will be decided in the borrower’s favour. Exact obligations depend on the lender type and loan, so check the Directions on rbi.org.in.
What Borrowers Should Do: A Step-by-Step Approach
Collect evidence. Keep the KFS, loan agreement, screenshots, SMS/email trails, repayment receipts, and call details.
Complain in writing to the lender. Use the grievance officer details in the KFS or on the lender’s website. Ask for a complaint reference number.
Note the timeline. If the lender does not reply within 30 days, or the reply is unsatisfactory, you can escalate under the RBI Integrated Ombudsman Scheme, 2021, through the RBI’s complaint portal (cms.rbi.org.in).
Raise credit report errors separately. Under RBI rules for credit information companies, if a lender does not fix a reported error within 30 days, the borrower may be entitled to compensation of Rs 100 per day. Check current rules before relying on this.
Check if the lender is legitimate. Confirm the loan is from a regulated entity. Complaints against unauthorised lenders can be reported on the RBI’s Sachet portal.
Consider mediation or arbitration if a financial claim remains unresolved and the loan agreement allows it.
Traditional vs Modern Resolution Methods
Method | Best for | Limitation |
Lender’s grievance channel | First-level complaints, errors | Depends on lender responsiveness |
RBI Ombudsman | Deficiency in regulated services | Applies to regulated entities only |
Court litigation | Complex or contested claims | Slow and costly for small-ticket loans |
Online dispute resolution (ODR) | High-volume, low-value loan disputes | Needs an arbitration clause or party consent |
Loan disputes are usually small in value but large in number. A court case over a Rs 40,000 loan costs more than the claim itself, which is why lenders and fintech companies increasingly look at digital processes.
How Online Dispute Resolution Fits In
Online dispute resolution (ODR) moves conciliation, mediation and arbitration online. Notices, evidence, hearings and settlement or award all happen through one digital workflow. For lenders, this means a documented trail. For borrowers, it means they can take part without travelling to a hearing.
A practical point: arbitration depends on a valid arbitration clause in the loan agreement. Lenders should check this before starting a proceeding, and borrowers should read it before signing. Conciliation and mediation remain available where parties agree to try them.
Where Webnyay Can Help
Webnyay offers two relevant solutions for lenders.
For complaints before they turn into disputes, Webnyay’s grievance redressal software lets banks and NBFCs receive, track, and resolve complaints, from service issues to loan disputes, with RBI-aligned processes and audit trails. This helps a lender show it handled a complaint within a structured process.
For disputes that remain unresolved, Webnyay’s online dispute resolution platform supports conciliation, mediation and online arbitration under the Arbitration and Conciliation Act, 1996. Its workflow includes an arbitration clause check at intake, automated notices over email, SMS and WhatsApp, an evidence vault and virtual hearings.
Webnyay provides dispute resolution services at the parties’ direction. It is not a law firm and does not give legal advice.
Frequently Asked Questions
Who is responsible if my loan app and my lender are different entities?
Under the RBI’s Directions, the regulated entity (the bank or NBFC) remains responsible for grievance redressal, even if the app is operated by an LSP.
Where can I find the grievance officer’s details?
The Key Fact Statement should contain them. Lenders should also publish them on their website and app.
Can I exit a digital loan after taking it?
During the cooling-off period, you can exit by repaying the principal and proportionate APR without penalty. The period length depends on the lender’s policy within RBI’s framework.
What if a lender ignores my complaint?
Escalate to the RBI Ombudsman after 30 days of no response or an unsatisfactory reply, if the lender is a regulated entity.
Can an unregistered lending app be reported?
Yes. The RBI’s Sachet portal accepts complaints about unauthorised lending activity.
Is ODR legally binding?
An arbitral award under the Arbitration and Conciliation Act, 1996 is enforceable like a court decree, subject to the Act’s provisions. A mediated or conciliated settlement binds the parties on the terms they agree.
Next Step for Lenders and Fintechs
If your team still handles loan complaints through emails, spreadsheets, and calls between the LSP and the NBFC, disputes will keep slipping through the gaps. Webnyay can help you set up a structured complaint-handling process and, when needed, an ODR workflow for unresolved loan disputes. Explore Webnyay’s grievance redressal solution and ODR platform, or book a demo to see how it fits your lending operations.
Disclaimer: This article is for general information and does not constitute legal advice. Regulatory requirements change, so please verify current RBI Directions and consult a qualified professional for your specific situation.