Credit Information Bureau Limited is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. ICICI Bank, Bank of India, State Bank of India, Union Bank, Sundaram Finance, Indian Overseas Bank, Standard Chartered Bank, HSBC and Trans Union Internaitonal Inc are shareholders in CIBIL. Trans Union is holding 47.5% shares in the entity.
CIBIL’s products, especially the CIBIL TransUnion Score and the CIR are very important in the loan approval process. The credit score helps loan providers quickly determine, who they would like to evaluate further to provide credit. The CIBIL TransUnion Score ranges from 300 to 900. Our data indicates that loan providers prefer a credit scores which are greater than 700.
There have been many complaints from customers on the banks reporting default status of a credit card holder to CIBIL. Many banks use CIBIL as a tool to pressurize card holders in making payment of the alleged dues against the card account. This will have a serious implication on the financial credibility of the card holder. Whenever a person applies for loan to banks or other financial institutions, a search by the institutions and banks is done with the CIBIL to assess the credibility of the applicant. If the Applicant’s name appears in the defaulters list then no loan will be sanctioned. However, in this process, many false cases may get reported to CIBIL.
RBI has stipulated guidelines for the banks and other financial institutions to follow before reporting default status of a credit card holder to the Credit Information Bureau of India Ltd. (CIBIL) or any other credit information Company authorized by RBI, banks.
NBFCs may ensure that they adhere to a procedure, duly approved by their Board, including issuing of sufficient notice to such card holder about the intention to report him/ her as defaulter to the Credit Information Company. Therefore, it is important for the banks to issue a notice to the card holder about the bank’s intention to report to CIBIL or similar companies.
It is also required that the card holder should be intimated about the notice period for such reporting and also the period within which such report will be withdrawn in the event the customer settles his dues after having been reported as defaulter.
RBI states that Banks / NBFCs should be particularly careful in the case of cards where there are pending disputes. The disclosure/ release of information, particularly about the default, should be made only after the dispute is settled as far as possible.
In all cases, a well laid down procedure should be transparently followed. These procedures should also be transparently made known as part of Most Important Terms & Conditions (MITCs).
So, if you are a victim of CIBIL reporting, then check whether the bank has followed RBI guidelines and, if necessary, lodge a complaint with banking ombudsman.