Credit Card Default Settlement - Step by Step Guide

Here is how you have to deal with it. When you have queries on credit card defaults and delayed payments which has taken the payment obligation of the banker to few Lakh rupees.

Talk to the bank who issued the card and tell them you would like to settle off in good faith and ask for concession and negotiate hard, yes put all your negotiation skills to work here.

Once you both settle on some amount these are the steps you MUST and Should follow. It is better to negotiate with the bank itself rather than the collection agent because Bank Pays to the Collection Agent commission as high as 15% of the recovered amount and he will haress you until you pay it to the bank because the agent is awaiting his comission.

§         Get a letter from the bank in which they mention "Final Settlement of Outstanding dues" with your complete name, address and credit card number on which you have defaulted.                                                                                                      

§         Make your payment by CROSSED CHEQUE only

§         As soon as the payment is done, close this credit card account by giving writing instructions saying w.r.t Final Settlement, I have cleared all the dues and want this account to be closed. [Keep a proof of closing this account, say banker stamps on the second copy of the lettr or send it by registeredA.D]

• Preserve all this documentation for the next 5 years, atleast.
• Chances are the your name will be in the CIBIL defaulters list, give time of 6 months before you apply for another loan so that the bank clears your name off defaulters list.

§         Work and Plan your finances well before you opt for any other form of credit - card, personal Loan, auto loan etc

§         Next time when you apply for any kind of credit, if your name is still in the defaulters list, then you have every right to know on which account you have defaulted. If this is the same as the credit card account on which you have defaulted, then all those documents of Final Settlement, crossed Cheque payment will come in handy here. Attach attested photocopies and try to get your name cleared off the defaulters list. Don't submit the originals you have.

§         And finally you have to live with this painful process.

If Settlement Amount is as Large as Rs 300,000 [3 Lakh] ? Hire a lawyer because the deal is big and in any case save all the documentation.

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Credit Score Ratings by CIBIL

Credit report contains information about all the loans and credit cards that a customer has and some other details like:

§         Personal identification details like name, address, pan no, passport and driving license.

§         The repayment status of the account

§         Details of all the closed accounts

§         No of enquiries made by member banks

§         Amount overdue

Depending upon the payment track record of all the current as well as closed accounts that a customer has CIBIL gives rating to every individual in forms of score. It ranges between 100-900 and is a 3 digit code which shows the position of the borrower in terms of making the payments, may it be for a card or for a loan and any other facility obtained. CIBIL ratings are given on the basis of score of an individual.

CIBIL Credit Score Range

It further is divided into 3 broad categories; excellent, good, poor and fair. We can also say that CIBIL scoring id divided into three categories:

      »  High Score

      »  Low Score

      »  No or Zero Score

§         When a customer’s account is clean as he has been regular in making all his payments, there is no amount overdue in any of the loan and there has been no bounce or settlement in the closed accounts too, his CIBIL score would be high.

§         If the borrower has been a non performer with amount outstanding any of his account and also has settlement with member banks on his accounts, it means that he is not a good customer and his CIBIL score is going to be low.

§         If you have taken no loan till and there are no matches in your report for a credit facility, your score will be Zero.

*How to lodge Credit Card Complaint

 

Let us understand what does an excellent, good, poor and fair CIBIL ratings signify:

§         If the score given to you by credit bureau is in between 751-900, it is considered to be very high and your rating is excellent.

§         Anything between 700-750 is high and the rating is good.

§         If it is less than 700 and 500 it is considered to be average in case of 700 and very low for 500 and below. Similarly the CIBIL ratings go on like fair and poor if the score is less than 500.

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How to remove Credit Card Defaulter's name from CIBIL Report

Cibil credit card amounts write off is a condition, which happens after continuous 180 days of default of your credit card dues. Banks write offs your credit card account if you do not make the payment, which is due on your card for 6 months.

However, you will still keep on receiving calls from the collection agency but the account is written is a write off account. It indicates the bad history of a borrower and it stays in your credit report for 7 years according to the rules.

*Credit Card Default - Costs 7 year punishment

Here is how you can remove a credit card write off from your cibil report:

• Well, a write off stays in your credit report for 7 years; but the banks have the power to upgrade any debt three times every seven years and this means that it can actually stay in your credit report for complete 21 years. But there is a way out to this and one can improve his/her cibil report by getting rid of this.

*Credit Default Settlement - Step by Step Guide

• The moment you figure that you have a write off account in your credit report, you must immediately contact your lender. Your lender would surely help you if you are showing interest in making the payment and would not treat you badly or as a bad customer. Get the total amount due on you r card calculated with the help of your lender.
• You may require presenting the last monthly bill statements received and some other details of your credit card. Follow the instructions and give proper details needed. Your bank will now give the exact figure of amount that you owe to the bank.
• Pay this amount and get a no due certificate or payment receipt from your lender. The process is not over yet. You will now have to call up your bank again and request them to update about the full and final payment to the credit bureau. You bank will now update this to cibil and within a span of 40 days, the write off will get cleared from your cibil report and the account would be shown as a normal closed account.
• You can contact Cibil directly also, if your bank does not co operate in updating the status to cibil and tell them about your settlement by showing the payment receipt. After some clarifications and enquiries from the lender, the credit bureau will update the same in your report and your report will be clean.

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Features of CIBIL Credit Report

The Main Features Of Credit Report Are

• Personnel Information - Name, current residential address and company’s address in case of a firm.
• Pan Card Number, Driving License Number, Passport Number and Voters Id Number.
• Date of Birth and Date of Incorporation of the firm.
• Information about all the credit facilities availed by the borrower from any of the member institutions. This includes details for all the loans, credit cards etc.
• Repayment status of all the current accounts as well as closed accounts.
• Default details if any in any of the account.
• Amount overdue on a particular account.
• No of enquiries made by the member banks in past 12 months.

You can see now how the credit history is reflected in the cibil report. It contains all the information that is mentioned in the features of the report.

How to apply for Credit Card

You can not check your cibil report directly. Credit Bureau does not provide a credit report to any individual and only member institutions can view your report, but here are some ways by which you can have a access to your report.

    1.    If you have applied for a loan or credit card with any of the member banks of cibil, then you can approach them to send you a copy of your credit report. You can also go and collect a copy from the bank on your own.

    2.    You can apply for a credit facility from any of the bank which is a member of cibil. The bank will get your credit reportgenerated to know the recent and current status of your payment record. You can now ask the lender to give a copy of this report to you.

    3.    You can take the 9 digit control number from the bank in which you have submitted your loan application and approach cibil by calling up on the help desk number and ask for the information.


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Decisions with CIBIL data

Does the CIR indicate if credit should or should not be given?

The CIR only provides available factual credit information and does not provide any opinion, indication or comment pertaining to whether credit should or should not be granted. The credit grantors who have received an application for credit will make the credit decision. CIBIL does not grant or deny credit.

If my credit application has been rejected, will this fact appear in my credit record?

The Members do not provide this information to CIBIL and hence it will not be in the CIR.

If a credit grantor has denied me credit, could others reject my application?

Not necessarily. Different credit grantors may use a CIR differently, or take into account other factors when they assess your application. Although one bank may deny you credit, another bank could take a different view and accept your application.

What benefits does a borrower get from CIBIL?

CIBIL's CIRs are aimed at helping credit grantors make fast and objective lending decisions. This will contribute to a more competitive credit marketplace among Credit Grantors. With a Bureau in place, responsible customers can expect faster and more competitive services at better terms from the Credit Grantors.

How do I rectify information in a credit report drawn on me?

Please contact the credit grantor from whom you have availed the loan and request the necessary changes. The credit grantor will then report the change to CIBIL and it will subsequently make the necessary updates in our records.

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Access of CIBIL Information

Who can access CIRs?

Reports can be accessed by Members on the principle of reciprocity ie only those Members who have provided all their data to CIBIL are permitted to access CIRs. Members can do so only to take valid credit decisions. Disclosure to any other person or entity is prohibited.

Can the borrower obtain his own CIR from CIBIL?

No. However, if a Member has drawn a report on that borrower, a copy of the same can be obtained from the Member.

Can CIBIL provide CIRs to credit providers in other countries?

No. CIBIL will provide credit information reports only to it's Members in India.

Whether Right to Information Act, 2005 is applicable to CIBIL?

No. The reason being that the CIBIL is not a “Public Authority” as defined under Sec 2(h) of the Right to Information Act, 2005.

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CIBIL and Information Security

What are the measures taken by CIBIL to ensure the security of Member's data?

The security of the Members' data is of paramount importance to CIBIL. CIBIL's security measures are aligned with global ‘best practices’, stringent risk management standards and are subject to regular audits by independent auditors. CIBIL has adopted state-of-the-art technology to provide information security. The important aspects are detailed below:

• Information in CIBIL database is accessed only on a strictly ‘Need to Know’ basis. For example, the access to the Data Center is available only to authorized personnel engaged in regular systems and database administration.
• Access control devices, surveillance cameras installed at strategic locations and biometric access system at the Data Center with the highest levels of security.
• Comprehensive perimeter security solution consisting of a Firewall, Intrusion Detection and Vulnerability Assessment System to secure the network infrastructure from external security risk.
• Installation of the following devices to deal with fire hazards:
  • State-of-the-art (VESDA) smoke detection system to provide early warning and isolation of potential fire hazards.
  • FM200 based Fire Suppression System to extinguish fire with minimal damage to the IT systems.
• Anti -Virus software installed on all servers in the Data Center. Security patches and necessary configurations are continuously applied to the Servers and Network appliances.

Another vital area in which security is of the utmost importance is the two-way transmission of information between CIBIL and it's Members. In this regard, CIBIL uses:

• 128-bit SSL encryption for all Web-based transactions including FTP.
• Cryptographic solutions for all information sent or received through any physical media i.e. CD, DAT and DLT.

What is encryption?

Encryption is technique used to mask proprietary information in order to prevent it from being accessed by unauthorized individuals. Only authorized individuals who have been provided with the appropriate decoding software can unscramble the information. Thus, encrypted information that it's Members provide CIBIL are extremely secure.

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Information held by CIBIL

What type of information on a borrower is available in the CIR?

The CIR includes the following information:

• Basic borrower information like:
  1. Name
  2. Address
     
     In case of individuals:
     
  3. Identification numbers
  4. Passport ID
  5. Voters ID
  6. Date of birth
     
     In case of non-individuals
  7. D-U-N-S^® Number
  8. Registration Number
  9. Legal Constitution
• Records of all the credit facilities availed by the borrower
• Past payment history
• Amount overdue
• Number of inquiries made on that borrower, by different Members
• Suit-filed status.

What type of information is NOT included in the CIR?

The CIR does not contain:

• Income / Revenue details
• Amount(s) deposited with the bank
• Details of borrowers' assets
• Value of asset(s) mortgaged
• Details of investment(s)

When is a credit facility classified as 'default'?

CIBIL does not classify any accounts as default accounts. It merely reflects this information after the Member has classified it as such. The Number of Days Past Due and / or Asset Classification as per RBI definition as submitted by Members is reflected in the CIR.

How do I ensure that a CIR drawn on me as an individual / organisation does not contain negative information?

The best preventive measure is to exercise good money management practices and make repayments on time. Please see 'How to improve your credit' section for more details.

If I am a first-time borrower, will I be at a disadvantage as there will be no information on me?

As a new borrower, there will be a new file created for you. It will then be in your interest to build up a favourable repayment track record for future credit applications.

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CIBIL Operation

How does CIBIL function?

For credit grantors to gain a complete picture of the payment history of a credit applicant, they must be able to gain access to the applicant's complete credit record that may be spread over different institutions. CIBIL collects commercial and consumer credit-related data and collates such data to create and distribute credit reports to Members.

Where does CIBIL get the information from?

CIBIL primarily gets information from its Members only and at a subsequent stage will supplement it with public domain information in order to create a truly comprehensive snapshot of an entity’s financial track record.

What is a Credit Information Report?

A Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions - quickly and objectively.

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Introduction to CIBIL

What is CIBIL?

CIBIL - India's first credit information bureau- is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members in the form of credit information reports.

Who owns CIBIL?

CIBIL's equity was held by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited and Trans Union International Inc. The shareholding pattern was in the proportion of 40:40:10:10 respectively.

Current Shareholding

The shareholding pattern has now been diversified to include the following entities representing varied categories of credit grantors : -

On which segments does CIBIL provide credit reports?

CIBIL is a composite Credit Bureau, which caters to both commercial and consumer segments. The Consumer Credit Bureau covers credit availed by individuals while the Commercial Credit Bureau covers credit availed by non-individuals such as partnership firms, proprietary concerns, private and public limited companies, etc.

Who are Members of CIBIL?

Banks, Financial Institutions, State Financial Corporations, Non-Banking Financial Companies, Housing Finance Companies and Credit Card Companies are Members of CIBIL.

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How to get your Credit report?

Nowadays when you apply for a Loan, the Bank/Institution may or may not approve it depending upon your credit score from CIBIL. But the question you may have is.. From where will I get this Credit report?. Don't worry now you can have the credit report from any financial institution for a nominal fee of Rs.50/-. If they refuse to give the report take a print out of the below RBI order, attach with your application and demand for the report.

RBI/2008-09/507

DBOD.No.DL.BC. 138/20.16.042/2008-09

June 24, 2009

i) All Scheduled Commercial Banks (excluding RRBs and LABs) and
ii) Notified All-India Financial Institutions

Dear Sir

Access to own credit report

Please refer to our circular DBOD No.DL.11590/20.16.034/2007-08 dated February 27, 2008 advising banks/FIs in the context of Credit Information Companies (Regulation) Act, 2005 to urgently initiate steps to build up database and be in readiness for effective exchange of credit information without any loss of time.

2. Of late, Reserve Bank has been receiving a number of complaints, including under the Right to Information Act, 2005, that customers are unable to get their own credit report from banks.
   
   
3. In this connection we invite your attention to the provisions of sub section (1) of Section 21 of the Credit Information Companies (Regulation) Act, 2005, which provides “any person, who applies for grant or sanction of credit facility, from any credit institution, may request such institution to furnish him a copy of the credit information obtained by such institution from the credit information company”. Further, sub-section (2) of the said Section also specifies that every credit institution shall on receipt of request, as indicated in sub-section (1), shall furnish to such person a copy of the credit information subject to payment of charges specified by the Reserve Bank under the Regulations.
   
   
4. You might be aware that Reserve Bank, in Credit Information Companies Regulations,2006, framed under the Act, has already prescribed in Regulation 12(3) a maximum fees of Rs.50/= (Rupees fifty only) for the purpose.
   
   
5. Banks and Financial Institutions are, therefore, advised to ensure strict compliance with the provisions of the Credit Information Companies (Regulation) Act, 2005 as well as the rules and regulations framed thereunder.

Please acknowledge receipt.

Yours faithfully
(Vinay Baijal)
Chief General Manager

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CIBIL and Law

The Reserve Bank of India has stated that banks and finance companies issuing credit cards should not resort to intimidation or harassment to recover dues.

"The banks or non-banking finance companies (NBFCs) and their agents should not resort to intimidation or harassment of any kind either verbal or physical against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the credit card holders' family members, referees and friends, making threatening and anonymous calls or making false and misleading representations," the RBI said in its draft guidelines on Credit Card Operations.

When banks outsource credit card operations, they had to be extremely careful that the appointment of such service providers did not compromise with the quality of the customer service and the bank's ability to manage credit liquidity and operational risk.

In the choice of the service provider banks had to be guided by the need to ensure confidentiality of the customer's records, respect customer privacy and adhere to fair practices in debt collection.

Before reporting default status of a credit card holder to the Credit Information Bureau of India Ltd (CIBIL) or any other credit information company authorised by the RBI, the banks might ensure that they adhered 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.

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CIBIL and it's siblings - Equifax, Experian and Highmark

Three more credit information companies are into business after the RBI approval. But the existing local credit bureau Cibil (Credit Information Bureau India Ltd) is only approved by the banking regulators to maintain credit histories of insurance and telecom customers.

EquifaxCredit Information Services, Experian Credit Information Company, and Highmark Credit Information Services are the three new entrants. These entities were short-listed from 13 applicants including Cibil. Business for credit bureaus is expected to grow given rising defaults in consumer credit and growing risk consciousness among lenders.

Credit information companies inform banks whether a prospective borrower is creditworthy or not based on his past payment track record.

Among the new entrants Equifax, is US based and Experian an Irish company in the credit information business. Both have a long-established transnational presence. Highmark is a start-up promoted by individuals Anil Pandya and Anuj Desai.

With more players in credit information, competition is expected to hot up. Arun Thukral, managing director, Cibil, said that the approval allows it to extend service to more industries including insurance and telecom, which will help widen its customer base. Commenting on the competition that would emerge with the entry of more players, Mr Thukral said that in advanced markets companies rely on credit information from more than one source and new entrants would not eat into Cibil’s business. Cibil has close to 164 members from the financial sector that use its database.

Richard Fiddis, managing director, Emerging Markets at Experian said, the company has for now got a provisional licence to set up operations. Experian has already received the approval of the Foreign Investment Promotion Board to invest 49% in the venture. It had identified six local partners, but refused to divulge their names as well as the amount of money it was proposing to invest in the venture.

Cibil was originally promoted by SBI (40%), HDFC (40%), Dun & Bradstreet Information Services India (10%) and Trans Union International (10%). Subsequently, the company inducted more investors including ICICI Bank, HSBC, StanChart, Citicorp, Bank of Baroda, IOB, Sundaram Finance, Bank of India, GE, UBI and PNB. ICICI Bank, SBI, D&B and Trans Union hold 10% stake each in Cibil. Others own 2.5%-5% each

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Credit Card Operations of banks- RBI Guidelines II

5. Protection of Customer Rights

Customer’s rights in relation to credit card operations primarily relate to personal privacy, clarity relating to rights and obligations, preservation of customer records, maintaining confidentiality of customer information and fair practices in debt collection. The card issuing bank / NBFC would be responsible as the principal for all acts of omission or commission of their agents (DSAs / DMAs and recovery agents).

i. Right to privacy

a.Unsolicited cards should not be issued. In case, an unsolicited card is issued and activated without the consent of the recipient and the latter is billed for the same, the card issuing bank / NBFC shall not only reverse the charges forthwith, but also pay a penalty without demur to the recipient amounting to twice the value of the charges reversed.

b. Unsolicited loans or other credit facilities should not be offered to the credit card customers. In case, an unsolicited credit facility is extended without the consent of the recipient and the latter objects to the same, the credit sanctioning bank / NBFC shall not only withdraw the credit limit, but also be liable to pay such penalty as may be considered appropriate.

c. The card issuing bank / NBFC should not unilaterally upgrade credit cards and enhance credit limits. Prior consent of the borrower should invariably be taken whenever there are any change/s in terms and conditions.

d. The card issuing bank / NBFC should maintain a Do Not Call Registry (DNCR) containing the phone numbers (both cell phones and land phones) of customers as well as non-customers (non-constituents) who have informed the bank / NBFC that they do not wish to receive unsolicited calls / SMS for marketing of its credit card products. The DNCR should be set up within two (2) months from the date of this circular and wide publicity should be given to the arrangement.

e. The intimation for including an individual’s telephone number in the Do Not Call Registry (DNCR) should be facilitated through a website maintained by the bank / NBFC or on the basis of a letter received from such a person addressed to the bank / NBFC.

f. The card issuing bank / NBFC should introduce a system whereby the DSAs/ DMAs as well as its Call Centers have to first submit to the bank / NBFC a list of numbers they intend to call for marketing purposes. The bank / NBFC should then refer to the Do Not Call Registry (DNCR) and only those numbers which do not figure in the Registry should be cleared for calling.

g. The numbers cleared by the card issuing bank / NBFC for calling should only be accessed. The bank / NBFC would be held responsible if a Do Not Call Number (DNCN) is called on by its DSAs / DMAs or Call Centre/s.

h. The card issuing bank / NBFC should ensure that the Do Not Call Registry (DNCR) numbers are not passed on to any unauthorised person/s or misused in any manner.

i. Banks / NBFCs/ their agents should not resort to invasion of privacy viz., persistently bothering the card holders at odd hours, violation of "do not call" code etc.

(ii) Customer confidentiality

a. The card issuing bank / NBFC should not reveal any information relating to customers obtained at the time of opening the account or issuing the credit card to any other person or organization without obtaining their specific consent, as regards the purpose/s for which the information will be used and the organizations with whom the information will be shared. Banks / NBFCs should satisfy themselves, based on specific legal advice, that the information being sought from them is not of such nature as will violate the provisions of the laws relating to secrecy in the transactions. Banks / NBFCs would be solely responsible for the correctness or otherwise of the data provided for the purpose.

b. In case of providing information relating to credit history / repayment record of the card holder to a credit information company (specifically authorized by RBI), the bank / NBFC may explicitly bring to the notice of the customer that such information is being provided in terms of the Credit Information Companies (Regulation) Act, 2005.

c. 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. The procedure should also cover the notice period for such reporting as also the period within which such report will be withdrawn in the event the customer settles his dues after having been reported as defaulter. 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 MITCs.

d. The disclosure to the DSAs / recovery agents should also be limited to the extent that will enable them to discharge their duties. Personal information provided by the card holder but not required for recovery purposes should not be released by the card issuing bank / NBFC. The card issuing bank / NBFC should ensure that the DSAs / DMAs do not transfer or misuse any customer information during marketing of credit card products.

(iii) Fair Practices in debt collection

(a) In the matter of recovery of dues, banks / NBFCs may ensure that they, as also their agents, adhere to the extant instructions on Fair Practice Code for lenders (circular DBOD. Leg. No. BC. 104 /09.07.007 / 2002–03 dated May 5, 2003) as also IBA’s Code for Collection of dues and repossession of security. In case banks / NBFCs have their own code for collection of dues it should, at the minimum, incorporate all the terms of IBA's Code.

(b) In particular, in regard to appointment of third party agencies for debt collection, it is essential that such agents refrain from action that could damage the integrity and reputation of the bank / NBFC and that they observe strict customer confidentiality. All letters issued by recovery agents must contain the name and address of a responsible senior officer of the card issuing bank whom the customer can contact at his location.

(c) Banks / NBFCs / their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the credit card holders’ family members, referees and friends, making threatening and anonymous calls or making false and misleading representations.

6. Redressal of Grievances

a. Generally, a time limit of sixty (60) days may be given to the customers for preferring their complaints / grievances.

b. The card issuing bank / NBFC should constitute Grievance Redressal machinery within the bank / NBFC and give wide publicity about it through electronic and print media. The name and contact number of designated grievance redressal officer of the bank / NBFC should be mentioned on the credit card bills. The designated officer should ensure that genuine grievances of credit card subscribers are redressed promptly without involving delay.

c. The grievance redressal procedure of the bank / NBFC and the time frame fixed for responding to the complaints should be placed on the bank / NBFC's website. The name, designation, address and contact number of important executives as well as the Grievance Redressal Officer of the bank / NBFC may be displayed on the website. There should be a system of acknowledging customers' complaints for follow up, such as complaint number / docket number, even if the complaints are received on phone.

d. If a complainant does not get satisfactory response from the bank / NBFC within a maximum period of thirty (30) days from the date of his lodging the complaint, he will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s. The bank / NBFC shall be liable to compensate the complainant for the loss of his time, expenses, financial loss as well as for the harassment and mental anguish suffered by him for the fault of the bank and where the grievance has not been redressed in time.

7. Internal control and monitoring systems

With a view to ensuring that the quality of customer service is ensured on an on-going basis in banks / NBFCs, the Standing Committee on Customer Service in each bank / NBFC may review on a monthly basis the credit card operations including reports of defaulters to the CIBIL, credit card related complaints and take measures to improve the services and ensure the orderly growth in the credit card operations. Banks / NBFCs should put up detailed quarterly analysis of credit card related complaints to their Top Management. Card issuing banks should have in place a suitable monitoring mechanism to randomly check the genuineness of merchant transactions.

8. Right to impose penalty

The Reserve Bank of India reserves the right to impose any penalty on a bank / NBFC under the provisions of the Banking Regulation Act, 1949 for violation of any of these guidelines.

back to RBI guidelines on Credit Card

Credit Information Report and Checking Inaccuracies

Pratiba Sachan was feeling extremely angry. How could the bank do this to her? She was a stickler for immaculate money management skills. She never once defaulted or made a late payment for that matter even on her telephone bills.

She had maintained all her accounts with her friendly neighbourhood bank, whom she banked with in all of 15 years, since she got her first pay cheque. She had been saving up religiously for the past 10 years to accumulate enough monies to buy a car and a cozy, contemporary apartment for herself.

Once she had her down payment secured for her apartment, she zeroed in on a really neat one, which was fitted with all the up-to-date amenities. It was located at a very accessible distance to all the places she frequented be it shopping malls, hospitals, multiplexes, the beach and of course her workplace. She even got the best interest rate in the marketplace with a popular housing finance company. Everything was coming together nicely when the big blow came. The HFC called to say, they could not proceed with her loan disbursement because she had a poor credit score! Armed with reams of paperwork and credentials from her still friendly neighbourhood bank, who unfortunately did not have the kind of interest rate on the loan she wanted, she was ready to tackle the matter. After several attempts at calming Pratiba’s indignation and succeeding finally, the HFC said they would be able to provide access to her Credit information Report. However, they also told her that if she wanted any clarification on the details mentioned, she should contact CIBIL and seek those clarifications.

To err is human and Pratiba’s `Credit Information Report’ is no exception to this fact. Errors could have easily crept up in her report that comprises of numbers. Incorrect information about her credit accounts, input errors and confusion caused through similar looking account information, names etc. could have resulted in the errors in her report. Currently there are no facilities enabled by CIBIL, unlike the practice abroad, where an individual can request his or her credit information report from CIBIL, even before he is about to make a credit transaction or apply for a loan. However, if an individual has applied for a loan and has been rejected the loan because of a poor credit score, he can then request the bank to allow him to access his credit report to seek any clarification on the information provided in the report.

Pratiba had the option of getting in touch with CIBIL with the control number of her credit report, which the HFC provided her with. The Control number is a nine digit unique number that helps CIBIL track an individual’s credit report from CIBIL’s database.`When attempting to access your credit report you also need to provide CIBIL with your loan details, the exact knowledge or discrepancies in the report that you have been made aware of by the bank and for which you seek clarification. Ofcourse, you need to pass on essential information such as your full name, date of birth, address, phone numbers, Pan no, Voters Id and Passport no to help CIBIL assist you.

In Pratiba’s case, she was fortunate to communicate the discrepancies in her credit report and get it rectified in a matter of days. Her persistence paid off and the HFC was more than happy to sanction her loan amount. Right now, Pratiba is happily cocooned in her cozy, contemporary apartment and in the past 5 years has never defaulted on her EMIs even once!

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CIBIL The Gateway

The truth is today people spend more than our grandparents or parents ever did. Increasing incomes, desire to own a house in one’s early twenties, availability of variety in lifestyle and brand choices, a booming economy, growing number of enterpreneurs, new business establishments etc., are leading to a tremendous amount of money outflow. Money rotation is a key factor in a progressive economy and this means there is a lot of lending. How does one keep a tab on all the credit lent and how does one identify defaulters and refrain from lending to them again and again?

The government of India and RBI got together to bring CIBIL into existence. Currently Banks, Financial Institutions, State Financial Corporations, Non-Banking Financial Companies, Housing Finance Companies and Credit Card Companies are Members of CIBIL.

The idea behind setting up CIBIL is to gather all exisiting consumer and commercial credit information and pool it in a one point source for reference. As in an individual or commercial establishment could have accounts in several banks and credit from different lending institutions. All such data can be pulled out for a quick reference check on the individual or commercial establishment, seeking loans, to be aware of the repayment track record of the loan seeker and quickly decide on loan eligibility.

CIBIL acts as weeding mechanism, that helps identify poor repayment track records. It helps protect lenders from giving credit to people and establishments who are unlikely to repay what is lent. Even if credit is provided, it is done so at a very high rate of interest, thereby ensuring that the bank is able to recover a considerable sum of money even if a default happens some time into the loan tenure.

CIBIL to maintain Fraud database

On the flip side, if you have an impeccable repayment track record, you can reap benefits from it! Banks provide a lower interest rate for sound credit profiles and these `Credit Information Reports’ can work to your advantage. It also helps lenders and Banks quickly process a loan, without wasting valuable time on research and background check of the loan applicant.

To protect creditors information CIBIL has stringent security measures in place. Only members of CIBIL can access the info and even they can do so only on a requirement basis.

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Must Know about CIBIL - Flip Side

As with all mass processing systems that are not dependent on a single source for information, there are quite a few things that could be incorrectly recorded in the credit information reports, which are stored with CIBIL.

Here are a few instances, detailed for your understanding:

Lack of updated info:
You might have defaulted on a sum of money, say Rs 12,000 but repaid the sum later, maybe well past the due date for the payment. There could be instances where CIBIL did not get the updated info for its records. This will show up as a default and will affect the calculation of a good credit score.

Confusion of names:
There can be thousands of names that are similar in the CIBIL database. Things can go haywire if a person who shares your name has defaulted and all his defaults get recorded in your file. There was this one instance, which a loan applicant reported. Her name, Anju Jadeja, was confused with Anjum Taneja. Turns out Anjum Taneja passed away tragically in a freak accident, with nobody able to identify her until bank authorities decided to investigate the applicant after CIBIL corrected and ratified Anju Jadeja’s credit report. Till that point in time, the bank had put down Anjum’s bouncing cheques, as defaults on loan payments in Anju’s credit report. Today, Anju is a relieved woman.

Human input error:
The information that goes from the banks to CIBIL on a loan or credit card payment default may have been erroneous due to a simple input error by one of the bank employees. There was this instance when there was an accidental default of a month overdue payment of Rs 18,000 of one Tanushree Omkar. She cleared it the next month. However, the record that went to CIBI, had two additional zeroes, which made the default amount to Rs 18 lakh (Rs 1.8 million)!

Identity theft:
This is the most serious of all causes of errors and can have a disastrous impact on a person’s credit profile.

In recent times, identity thefts are on the rise. Right from a petty shopkeeper who swipes your card several times to sneak in an unofficial payment, to a terrorist who wants to access a billionaire’s account in a remote corner of the world, identity theft is becoming a serious crime that needs to be checked.

If you are a victim of identity theft, like Anupam Shekar was, then it is time to get your financial log in order. Keep track of all the cards that you use or do not use. In Anupam’s case, an impostor had captured his PAN card details using a clever ploy. Anupam recalled that someone had wanted to deliver a mail from his local bank only on the basis of identification and had been examining the PAN card given with great curiosity.

It was then that it struck him that anyone could access his mailbox in the huge apartment complex he resided in. The impostor then went on to open an account with a bank entering all the details he had gathered on Anupam by accessing his mailbox. Anupam did not know for a long time about this until he decided to apply for a new credit card and his bank rejected him outright, labelling him a defaulter. Anupam had to go to great lengths, spending precious time and energy, to clear his name.

Apparently, the impostor had directed all bank communication to another address, got a credit card on that account and spent indiscriminately until the card was locked by the bank due to several defaults on repayment.

The account was frozen but the impostor walked away scot free to scout for his next victim, but not before Anupam Shekar’s credit report was tarnished beyond repair.

*CIBIL the Gateway

Fixing an incorrect CIBIL record

If you need to seek clarifications in your credit report, here are the steps you should follow:

a. Contact the bank that declined a credit card or loan application on the basis of your poor credit score. Ask them for a clarification on the poor credit score and request them to provide the control number for your credit report.

b. The bank will provide you with the control number of the credit report and also share the information on the credit report that is responsible for your poor credit score.

Get in touch with CIBIL by calling their help desk numbers at 1800 - 224 / 245 or +91 22 6638 4600 / 2281 7788 provided on their Web site, http://www.cibil.com/.

You could also drop in an email at info@cibil.com referring your credit report’s control number. When attempting to clarify the information on your credit report, you need to inform CIBIL about the exact nature of the discrepancies in the report that you have been made aware of, by the bank.

The importance of the control number

The control number is a nine-digit unique number that helps CIBIL track an individual’s credit t report from its database.

Banks feed in borrower data and personal information, which the CIBIL systems pool together. The control number is generated when banks pull out your credit report on a requirement basis.

The control number is generated every time any bank or credit institution pulls out a credit report on you. CIBIL requires this number because it enables them to view the exact details that the bank has seen when they drew a report on you. Hence, it is important for you to request the bank to provide you the control number.

Dealing with an uncooperative bank

When the bank is uncooperative you could post a complaint on the bank’s Web site and if the bank does not respond within 15 days, you can register a complaint with the banking Ombudsman, presenting a copy of the complaint posted on the bank’s Web site as proof.

You can either register this complaint through their Web site, http://www.bankingombudsman.rbi.org.in/ or locate the nearest branch office through this link, http://rbidocs.rbi.org.in/rdocs/Content/PDFs/68033.pdf to register your complaint.

Need for direct access to credit reports for borrowers

It is the need of the hour for CIBIL to allow borrowers to access their respective credit reports not only on cases when the information needs to be verified but also as a way for individuals to keep a tab on their money inflow and outflow.

This will help them weed out errors, clarify facts and more significantly, identify impersonations before it is too late.

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