Procedure for reporting your Credit history even in case of default.
Most of the times your Bank/NBFC from whom you have taken a loan report your credit history to the CIBIL (the Indian credit rating agency) without your knowledge and consent. How right are they in doing this?
Here are few excerpts from the circular of RBI pertaining to Credit Card Operations by Banks. They cover under their ambit all forms of loan repayment reportings including those of Credit Card, with an underlining note to be strictly followed by all the Banks/NBFC s.
These points have been explicitly detailed under the Customer Confidentiality clause by RBI in their Circular no. RBI 2005-06/ 211DBOD. FSD. BC. No. 49/24.01.011/ 2005-06 dated Nov 21 2005.
6.2 Customer confidentiality
b. In case of providing information relating to credit history / repayment record of the card holder to a credit information company (specifically authorized by RBI), the bank/NBFC may explicitly bring to the notice of the customer that such information is being provided in terms of the Credit Information Companies (Regulation) Act, 2005.
c. Before reporting default status of a credit card holder to the Credit Information Bureau of India Ltd. (CIBIL) or any other credit information Company authorized by RBI, banks/NBFCs should ensure that they adhere to a procedure, duly approved by their Board, including issuing of sufficient notice to such card holder about the intention to report him/ her as defaulter to the Credit Information Company. The procedure should also cover the notice period for such reporting as also the period within which such report will be withdrawn in the event the customer settles his dues after having been reported as defaulter. Banks /NBFCs should be particularly careful in the case of cards where there are pending disputes. The disclosure/ release of information, particularly about the default, should be made only after the dispute is settled as far as possible. In all cases, a well laid down procedure should be transparently followed. These procedures should also be transparently made known as part of MITCs. (MITC stands for Most Important Terms and Conditions).
Would it not make a huge difference to you as a customer of the services of the bank such as loan and/or credit facility through credit cards; for it will allow you time to respond and react? Infact, if they do not adhere to this procedure, it clearly implies that Banks/NBFC s are abusing their authority by reporting directly to CIBIL without prior notice to the customer. Therefore we think it matters to all of us.
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Note: While we cannot declare in absolute sense that a BANK/NDFC cannot report; we have been able to gather the key excerpts from the circular of RBI dated 21 Nov 2005. And the same have been reiterated in their Master circular for Credit Card Operations of Banks dated 1 July 2011. And we promise you more information with clarity on this soon in our forthcoming articles.