Moneylife Impact: RBI Governor says CIBIL to provide one free credit report a year — fate of many other pro-consumer recommendations unclear
Moneylife Foundation’s recommendation that at least one free credit information report should be provided free of cost to borrowers seems to have been accepted by the Reserve Bank of India (RBI).  Recently, RBI Governor Dr Raghuram Rajan said, "By the end of the year, the CIBIL (Credit Information Bureau of India) will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies.”  This was probably the easiest of our recommendations to implement and we are happy that the RBI has accepted it. 
 
This is just one among many recommendations made by Moneylife Foundation in a memorandum submitted to the RBI on ‘Credit Information Issues faced by Retail Borrowers. The report, based on an online consumer survey and extensive discussions with all stakeholders was submitted to the RBI on 16 May 2016. Within two days, we received a response from the governor’s office indicating that Dr Rajan has gone through the letter and have forwarded it to the concerned department to examine the issue.   
 
Our memorandum said… 
One free report a year: In line with low technology cost, make it mandatory for all CICs to offer at least one credit report free of charge to all of its individual customers every year, on demand as is done in all developed countries. Further, Credit Report should be made available to the borrower in the easiest possible manner, keeping in mind that not all borrowers are net-savvy; it should be in simple language that is shorn of jargon and easy to understand.”
 
Readers would know that credit information reports are used by banks and financial institutions to decide whether to approve individual loans. A person who needs this report has to pay a charge to the credit bureau currently, if he wishes to avail of a credit report.  Interestingly, there are four credit bureaus licensed by the RBI. They are CIBIL, Experian India, CRIF High Mark and Equifax.  The governor’s statement does not indicate whether the other bureaus will be currently exempted and only, CIBIL (Credit Information Bureau of India Ltd), which has a head start of over a decade over the other bureaus, would be sending the free report. 
 
Incidentally, while the free credit information report (CIR) is a good first move, most borrowers are unable to understand the jargon mentioned in the report and their implication and need guidance. Since the RBI seems to have accepted one of our recommendations, it is important to restate the some of the key recommendations we have made in our memorandum
 

1)    Clarify the seven-year rule: Defaults and settlements should remain on CIRs for a 'maximum' of seven years, rather than 'minimum' of seven years.

2)    Enforce 'Obligation to Inform' Rule: A lender who submits or plans to submit negative credit information to the Credit Information Companies (CICs) should be required to inform the borrower about the same under the Obligation to Disclose rule. This, along with awareness about the consequences of being listed a defaulter may help recovery and is in the interest of lenders.

3)    'Introduce Lenders' Liability: Introduce the concept of lenders liability for errors omissions in reporting credit data to CICs.

4)    Dispute Resolution: We need a process for easy dispute resolution so that borrowers are not reported as defaulters for contesting interest rate or other changes, which they think as arbitrary, and provide for expeditious resolution under the Banking Ombudsman Scheme, 2006 (BOS). The Aditya Puri Committee, set up by the RBI, has recommended that disputes against the CIC should be brought under the BOS. This too should be implemented.

5)    Escalated System for Rectifying Errors: The process for rectifying mistakes in credit information reports has to be simplified. These mistakes occur due in automated de-duplication efforts or matching profiles as well as wrong reporting and mistakes by lenders. The onus for correcting mistakes is with banks, which are usually lethargic about helping those who are no longer their customers. The rectification process must offer borrowers a path of escalation to appropriate authorities, if banks are unwilling to act.

6)    One free report a year: In line with low technology cost, make it mandatory for all CICs to offer at least one credit report free of charge to all of its individual customers every year, on demand as is done in all developed countries. Further, Credit Report should be made available to the borrower in the easiest possible manner, keeping in mind that not all borrowers are net-savvy; it should be in simple language that is shorn of jargon and easy to understand.

7)    Awareness Campaign: Have a nationwide campaign to enhance financial literacy with regard to the credit reports and credit scores.

8)    Obligation to Inform the Borrower: Mandate that every commercial bank, regional rural banks (RRBs), local area banks and financial institutions, including housing finance companies (HFCs) and state financial corporations (SFCs) should inform each borrower about the consequences of late payments or non-payments on their credit history as well as the implications of a 'settlement' on their credit reports in a clear and unequivocal manner.

The Memorandum submitted by Moneylife Foundation can be accessed at the following link:

http://foundation.moneylife.in/memorandums/

 

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    COMMENTS

    manish shah

    4 years ago

    It is more than nine months still I am not able to see link on CIBIL to generate the free report. Request to share the details so people like us can be benefited.

    mahesh shetty

    4 years ago

    great work :-)

    Manoj Navin Parekh

    4 years ago

    Congratulation Money Life Team, Great efforts

    Hemant Prabhu

    4 years ago

    Lot of reports are fake....its not pro organization for consumers..and is one sided...never listen to customers.Bank wrong data is directly rated without any justification.

    REPLY

    Sucheta Dalal

    In Reply to Hemant Prabhu 4 years ago

    Mr Prabhu, we would urge you to attend our sessions on safe and smart investment or even the daily counselling session to understand more. Otherwise it would affect your financial life. You are completely unaware of how the system works in India an abroad. A little learning can save you from a lot of anguish in future. Best

    Sucheta Dalal

    In Reply to Hemant Prabhu 4 years ago

    Mr Prabhu, we would urge you to attend our sessions on safe and smart investment or even the daily counselling session to understand more. Otherwise it would affect your financial life. You are completely unaware of how the system works in India an abroad. A little learning can save you from a lot of anguish in future. Best

    Sisir

    4 years ago

    My views on this are different from ML's.

    a) Why should the confidential financial information of a country be in the hands of private companies or foreign companies? If usa does it the same way, do we need to copy blindly?

    b) Banks alongwith CICs have created a parallel court, wherein they punish the bank customers, even before the real Judiciary does! This is against the law of natural justice. When a bank customer couldn't pay, does the bank need to work with the customer to resolve the issue or tell other banks not to give anymore loans to that customer? Which one helps Indian Banking more?

    c) If a bank customer couldn't pay, how does telling other banks not to give loans to that customer help that bank recover it money? Does that bank want the customer to create money out of thin air (like how banks do!) and repay?

    d) Why banks forgot the "confidentiality clause" and gifting customer data to many third parties, for all sick reasons to mint money?

    e) CIBIL corrected my credit report when I just asked them to provide me the info of who reported what. If this is not colluding with the bank(s), what else is this?

    f) Where is RBI's document of prior study done in copying the credit rating mechanism of other countries to see whether it works in India or not? And why is RBI continuing this illegal mechanism even though it very well knows that it is doing more damage to Indian Banking than good?

    g) What would happen to the country if every domain start creating its own private court on the lines of credit rating mechanism for their own selfish reasons? On what basis our privileged Parliamentarians allowed the CIC Act in the first place?

    Someone do let me know if you know the answers to these questions. So far, I couldn't.

    REPLY

    Sucheta Dalal

    In Reply to Sisir 4 years ago

    Mr Sisir I think you are unaware of how consumer lending works all over the world. In fact, it is more draconian in so-called developed nations. It requires organisations like Moneylife Foundation to keep up the pressure on CICs and regulators to ensure a fair deal for consumers. The issues you have raised have no meaning -- if you want to borrow from formal lenders you will have to follow some rules. You are raising issues that ought to have been raised over a decade ago.
    That was the time when CIBIL rules did not even allow a person to obtain a credit report on payment of money. Yes, as shocking as it seems, the then MD of CIBIL, a personal friends, was not only rude and livid at me for raising this issue and questioning the practice (in an article in the Indian Express) but even stopped talking to me for a while.
    It is only after taking up repeated complaints to the RBI and the strong support of Kaza Sudhakar, then the Chief General Manager at the Reserve Bank of India that we finally moved to a system where we could get our own credit reports on payment of money.
    Now we have moved to the next ste p -- of getting ONE FREE report every year.
    You will still need help to understand it -- after all, you are not getting your credit score free.
    I would strongly urge you to join organisations like ours and work alongside us - it is only then that your views, which may or may not differ from ours, would lead to positive change for the benefit of society. Otherwise, what purpose do they serve?

    best

    Sisir

    In Reply to Sucheta Dalal 4 years ago

    Thank you for sharing your experience Suchetaji. I surely will join MLF soon as you are putting some sincere effort in changing the absurdities of the systems in place which would help the consumer get a level-playing field.

    I have gone through the memorandum you submitted to RBI and what little they have done, even after your team painstakingly did their job.

    Irrespective of how draconian financedom works around the world, I can clearly see that credit rating mechanism and some banking laws of India are clearly against the law of natural justice. And I am determined to fight this tooth and nail, alone or with other like-minded souls.

    Thanks again.

    Sucheta Dalal

    In Reply to Sisir 4 years ago

    Mr Sisir I think you are unaware of how consumer lending works all over the world. In fact, it is more draconian in so-called developed nations. It requires organisations like Moneylife Foundation to keep up the pressure on CICs and regulators to ensure a fair deal for consumers. The issues you have raised have no meaning -- if you want to borrow from formal lenders you will have to follow some rules. You are raising issues that ought to have been raised over a decade ago.
    That was the time when CIBIL rules did not even allow a person to obtain a credit report on payment of money. Yes, as shocking as it seems, the then MD of CIBIL, a personal friends, was not only rude and livid at me for raising this issue and questioning the practice (in an article in the Indian Express) but even stopped talking to me for a while.
    It is only after taking up repeated complaints to the RBI and the strong support of Kaza Sudhakar, then the Chief General Manager at the Reserve Bank of India that we finally moved to a system where we could get our own credit reports on payment of money.
    Now we have moved to the next ste p -- of getting ONE FREE report every year.
    You will still need help to understand it -- after all, you are not getting your credit score free.
    I would strongly urge you to join organisations like ours and work alongside us - it is only then that your views, which may or may not differ from ours, would lead to positive change for the benefit of society. Otherwise, what purpose do they serve?

    best

    Anil Kumar

    4 years ago

    Great work Moneylife.

    Sunil Rebello

    4 years ago

    Thank You Money Life..
    Presently such reports are not required by many Indians but if any one is in need of money - it will be a handy to review ones credit worthiness.
    GOD Bless

    Sunil Rebello

    4 years ago

    Thank You Money Life..
    Presently such reports are not required by many Indians but if any one is in need of money - it will be a handy to review ones credit worthiness.
    GOD Bless

    Sunil Rebello

    4 years ago

    Thank You Money Life..
    Presently such reports are not required by many Indians but if any one is in need of money - it will be a handy to review ones credit worthiness.
    GOD Bless

    P L Despande pawar

    4 years ago

    Excellent initiative from you & valuable response from Governor, RBI.
    SUCH FREE REPORTS should be made available to all once a year, regardless of whether he/she /it is a borrower or prospective borrower.
    Regards

    REPLY

    Sucheta Dalal

    In Reply to P L Despande pawar 4 years ago

    Mr Pawar, the credit reports are relevant ONLY if you are a borrower. If you have never borrowed, there will be no report in your name. Even if you apply for a report, it will say No History. However, you are right -- if there is a false entry against your name -- and we have some across cases like these, especially when names and surnames are very common (for e.g. sunil, ajay, , ajit, vijay, etc combined with surnames like patil, patel, shah, kulkarni, joshi, singh, etc) . best

    Ramesh Poapt

    4 years ago

    Great ML !!

    B. Yerram Raju

    4 years ago

    Congratulations on the baby step.

    REPLY

    Sucheta Dalal

    In Reply to B. Yerram Raju 4 years ago

    Thank you!

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