In a significant move to improve the accountability and customer service of credit information companies, the Reserve Bank of India (RBI) has issued new regulations that mandate credit institutions (CIs) and credit information companies (CICs) to pay customers Rs 100 per day in cases where they fail to resolve complaints within 30 days.
Complainants shall be entitled to a compensation of Rs 100 per calendar day in case their complaint is not resolved within a period of thirty (30) calendar days from the date of the initial filing of the complaint by the complainant with a CI/ CIC, states the Reserve Bank of India in its Framework for compensation to customers for delayed updation/ rectification of credit information notification.
Credit information companies, also known as credit bureaus, collate credit data from different lending institutions to formulate credit reports that aid in evaluating the creditworthiness of individuals or businesses. Any errors or discrepancies in these reports can severely impact an individual’s borrowing capability and cost of credit. Therefore, the swift and effective resolution of complaints lodged against such discrepancies is crucial.
Vineet Tyagi, Head of India Operations and Global CTO, Biz2Credit and Biz2X, says, “These changes mark a significant stride in bolstering customer protection and satisfaction. The mandate for credit information companies (CICs) to compensate for delays in credit data updates not only encourages operational efficiency but also yields several advantages for consumers. Prompt data updates alleviate the impact of inaccuracies on financial transactions. Faster corrections enhance creditworthiness, potentially unlocking better lending terms."
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Some of the CICs in India are Credit Information Bureau (India) Limited (CIBIL), CRIF Highmark, Equifax and Experian.
Per the RBI notification, a CI shall pay compensation to the complainant if the CI has failed to send updated credit information to the CICs by making an appropriate correction or addition or otherwise within 21 calendar days of being informed by the complainant or a CIC.
The CI/CIC shall advise the complainant of the action taken on the complaint in all cases, including the cases where the complaint has been rejected. In cases of rejection, the reasons for rejection shall also be provided by CI and CIC.
Where the grievance/complaint involves inaccurate credit information provided by more than one CI, the complaint shall be registered by the complainant with the concerned CIC. The CIC shall coordinate with all the CIs concerned and furnish the complainant with a comprehensive resolution of the grievance.
The complainant can approach the RBI Ombudsman, under the Reserve Bank—Integrated Ombudsman Scheme, 2021, in case of wrongful denial of compensation by CIs or CICs, as per the notification.
This rule favours customers who have had to deal with the slow processing of their grievances and pushes credit information companies to operate more efficiently. It encourages them to improve their internal dispute-resolution mechanisms and also helps in fostering increased transparency.
Tyagi says, "The regulations enhance transparency and trust in the credit reporting process. Furthermore, customers gain the means to hold CICs accountable for inaccuracies, ensuring their rights are safeguarded. These rule changes collectively contribute to a fairer, more customer-centric credit information landscape, benefitting both consumers and the industry at large.”