• Posted by CERC India
  • Posted in

Misreporting by banks can hurt your credit rating

Did you know that ignoring an unsolicited credit card and not paying the annual renewal fee can land you in the defaulter’s list? In the case of unsolicited cards or non-receipt of card statements, banks continue to charge annual fees, other charges, interest and penalty. When these charges accumulate to a large outstanding amount, the cardholder’s status is usually reported to Credit Information Bureau (India) Limited (CIBIL) which gives a negative credit rating.

Other instances of unfair reporting to CIBIL are when an outstanding amount arises as a result of wrong billing or any other error on the part of the bank or credit card company. Not only is the cardholder deprived of credit from any bank, he has to suffer great harassment and mental agony. Worse still, at times, some banks/credit card companies threaten the cardholder through SMSes and phone calls that they will report him to CIBIL.

As per Reserve Bank of India (RBI) rules, before reporting the default status of a credit cardholder to CIBIL sufficient notice must be given to the cardholder. But banks rarely do this. Many a time banks get away with indulging in fake negative ratings. And, there is no agency that will adversely rate banks for unethical practices!

CIBIL scoreboard

CIBIL is the largest and oldest rating agency in India for assessing creditworthiness of consumers seeking bank loans. Any financial transaction in loans routed through banks and their subsidiaries get into CIBIL’s system and scores are based on the timeliness and promptness of repayments.

The scoreboard ranges from 350 points to 900 points and any score above 750 points indicates high creditworthiness. CIBIL maintains a huge database with details of all kinds of borrowers be it credit cards, auto loans, home loans or loans to buy white goods or furniture. It analyses the data and gives a report card to the bank on request in return for an annual fee.

What consumers can do

Consumers can download their scorecard from the CIBIL website for a fee. They can report malpractices to the Banking Ombudsman. Aggrieved customers can challenge such mis-ratings online or seek an appointment with CIBIL officials. If a consumer has defaulted and has a poor rating score, it takes six to nine months to improve the score.

CERC initiative

CERC had written to RBI, Indian Bank’s Association and major credit card issuing banks and companies a few years ago to stop unfair reporting of default status to CIBIL. It had also called for a consumer-friendly procedure for reporting and withdrawal of the default status.

CERC pointed out that a cardholder should not be made liable to pay for wrong billing, error in the accounts and fees and penalty due to non-receipt of card statement. Also, in the case of any grievance about an outstanding amount, a cardholder’s status should not be reported to CIBIL until his grievance is fully redressed.


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