Credit bureaus promise prompt rectification in errors and medical-debts in the US
TransUnion, Equifax and Experian are present in India, either on own or through a partnership and it would be interesting if they follow the same system to accept and rectify errors
To the relief of American consumers, New York State's attorney general announced Monday that his office has reached an agreement with the three major credit bureaus in the US. Under the agreement, all three TransUnion, Equifax and Experian will revamp the way in which they rectify their own errors, and the way they handle medical debt.
In his statement to the Wall Street Journal, Attorney General Eric Schneiderman said that the three bureaus have promised to be “more proactive in resolving disputes over information contained in credit reports — a process federal watchdogs and consumer advocates have long decried as being stacked against individuals”.
The same big global names operate in India—TransUnion with Credit Information Bureau of India Limited (CIBIL), Experian India, Equifax (with CRISIL) and CRIF Highmark and it would be interesting if they follow the same system here as well. Remember, few years ago, how Suresh Prabhu, the current Railway Minister, found himself as marked defaulter for no fault of his? Apparently, a telephone company had failed to disconnect a mobile number and was piling on the minimum charges with interest that made him a ‘defaulter’. (Read: Credit Reports: Rightfully Ours
This has been long due, considering that credit-rating agencies have hardly ever been held accountable for the errors they make in their credit-reports, neither do they have any incentives to correct them, regardless of the trouble it causes the people. At the end of the day, the ordinary “consumer” is not their customer. Their real customers are mortgage lenders, cell phone providers, credit card companies, car dealers or any business or institution, which might lend money or enter into a contract with individual consumers. Their job is to provide their clients with credit-information on their prospective customers.
Your credit report would evaluate your credit worthiness or credit score, which is basically an estimate of how likely you are to pay back your loan. A higher rating would indicate a higher credit-worthiness, and that in turn will lead to a lower interest rate on your loans. Anyone with low credit-worthiness would be charged a higher interest rate. This however, is not happening in India at present.
Your credit score depends on how regularly and promptly you pay your bills. For example, if someone keeps maxing out on their credit card or is perennially late in repayment of bills, they will have a low credit rating. It seems rather simple, but in fact, there are some major issues with it.
It is evident that your credit report and score is of great significance to you – whether for a loan sanction, or the application for a new credit card. Now consider this – what happens if the credit bureaus report erroneous information about you – stating that you are delinquent on many bills despite the fact that you have made all your payments on time? It is obvious that this will have seriously negative consequences – but only for you. The agency has absolutely nothing to lose, and hence no inclination to fix its mistakes.
In the US, several consumers have reported mistakes and errors in their credit-reports, many of which are absolutely absurd. For example, in one complaint that a consumer reported to Consumer Affairs, a US based consumer news and advocacy organisation, his credit-report released by Equifax showed no changes from any of the previous months, yet his credit score had dropped by 80 points. When he called them up for help, they refused to provide any details over the phone. Instead, they requested him to write to them, promising they would respond within 30-90 days.
This is just one of many, many cases of careless errors made by credit-agencies. While they have no incentive to correct their errors promptly, the consumers have a lot to lose. It was in response to the increasing number of such complaints that the Attorney General's office started its investigation.
While the latest development in the US is promising, consumers will have to wait for anywhere between six months to three years in order for the changes to be implemented. This is perhaps because along with the agenda for efficient handling of errors, credit-agencies are also looking into changing the way they deal with customers' unpaid medical bills. The current system treats all kind of debts equally – and this includes medical bills. This causes issues in instances of medical emergencies, where delays may be either due to lack of immediate funds or because insurance companies are late in making payment.
In our country too, consumers would benefit a great deal if credit bureaus such as Credit Information Bureau of India Limited (CIBIL), Experian India, Equifax and CRIF Highmark are made more accountable, especially accepting and then rectifying errors made in credit reports.
A set of people are completely innocent victims of an identity mix-up within credit information companies (CICs) whose data algorithms match up multiple borrowings of people from different lenders to create a credit profile. Sometimes, this goes horribly wrong and people who have no borrowing or good credit record are shown as defaulters. Moneylife Foundation has helped resolve a couple of such cases.
Moneylife Foundation runs a free helpline to address all issues related with credit. You can access the Credit Helpline here: www.freecredithelp.in
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