Regulations
One Sided-Credit Reports
Harsh rules, poor awareness can destroy the financial future of a person
 
It is 15 years since India answered the demand of large lenders, such as banks and finance companies, by setting up the first credit information bureau to track the credit history of individual borrowers. This has placed enormous power in the hands of lenders. Today, by merely reporting a defaulter to the four credit information companies (CICs) permitted to operate in India, a lender can destroy the financial future of a person and banish him/her from the formal credit market. Yes, this is, indeed, as harsh as it sounds. 
 
Since individual borrowers have no voice, the rules are one-sided and unfair to them; correcting them is not a priority for the Reserve Bank of India (RBI). For the past year, Moneylife Foundation (a not-for-profit entity) has run a free helpline to help those who have had payment problems but want to get their financial life back on track. The biggest finding of this helpline is the shocking lack of awareness about credit bureaus, credit history and its implications, even among a large section of educated Indians. The reason is simple. There has been no attempt whatsoever to run public service advertisements to educate ordinary people who do not read business papers. Meanwhile, one-sided rules with harsh implications have been framed to empower lenders. Most people realise they have been listed as defaulters only when they are refused a credit card or a loan; others continue to remain perplexed at the rejection. Some have woken up with fright on receiving legal notices and threats of arrest from asset recovery agents, who have bought bad loans going back 10 years and added a fat, compound interest component to the original payment. 
 
Another reason for the low awareness is the absence of any significant advantage to having a spotless credit record. Unlike most developed nations, a high credit score does not allow you to negotiate better credit terms, whereas a default shuts you out of the formal credit market, instead of allowing you to borrow at a higher interest. 
 
In a country where banks are bailed out for their poor lending practices and where Rs280,000 crore worth of corporate loans are in process of corporate debt restructuring (as on 31 March 2015), the financial system is completely unforgiving for those who may have defaulted or disputed even a few thousand rupees. Even when a disputed payment is mutually is ‘settled’ with a lender, it is reflected in a person’s credit record and leads to denial of fresh credit, or even a credit card. While our rules say that Indians can ‘rebuild’ their credit score, most people don’t even get that  second chance of a loan at a higher rate, because most lenders do not have systems in place to provide it. Similarly, our rules say that your bad credit record will remain on record for seven years. In reality, our credit bureaus do not wipe out negative data at all. In the United States, the Fair Credit Reporting Act clearly restricts how long negative items can remain on credit records. It is seven years for most data and 10 for bankruptcy declarations. Many developed nations wipe records after six years. It is called the ‘Right to be Forgotten’.
 
Moneylife Foundation has innumerable examples of people who defaulted in 2004-05 and are still being chased by recovery agents with hugely inflated claims. Or they are being denied a new loan, 10 years after a previous default. In fact, lenders’ excesses and indiscriminate lending in 2006-08 had led the maximum number of people being reported as defaulters. It is time the victims got fairer rules. If your loan or credit card application has been repeatedly rejected, wake up now. Check your credit report and email us with details. It is time to speak up and ensure that lenders cannot remain unforgiving of small individual defaults while large corporate defaulters are routinely bailed out by the exchequer which recapitalises banks every few years.
 
Moneylife Foundation is conducting a short survey on credit scores. Click here to take this survey

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Guidelines for on-demand cab aggregator firms released
The government on Tuesday released an advisory for states on licensing, compliance and liability of on-demand IT-based transportation aggregator taxis operating in the country, putting special emphasis on driver compliance and safety.
 
According to the guidelines, any driver that wishes to register with an on-demand transportation technology platform must have a driving license of the appropriate category and the licensee must obtain and review a police verification report for such person, together with self-attested copy of voter ID card, PAN card, residential address proof along with contact details of two family members.
 
The advisory follows after a driver of a cab-aggregator had allegedly raped a woman during a taxi ride.
 
The guidelines also say that any person who has been convicted, within the past seven years, of driving under the influence of drugs or alcohol, or who has been convicted at any time for offences including fraud, sexual offences, use of a motor vehicle to commit a cognisable offence, a crime involving property damage, and/or theft, acts of violence, or acts of terror must not be permitted to use the licensee platform.
 
"Any driver that wishes to register with an on-demand transportation technology platform must hold a Reserve Bank of India KYC compliant bank account and must be of good character."
 
As for the aggregator themselves, the company must be a digital intermediary/marketplace that canvasses or solicits for a passenger to connect with a driver satisfying the necessary eligibility conditions and operating a validly registered vehicle.
 
Also, the operator must provide either a web or a mobile application-based customer service and grievance redressal centre having an operational telephone number and email address of a grievance redressal officer.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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