The emergence of Credit Information Companies (CICs), which collect data on retail borrower behaviour and assign credit scores, has been a boon for banks and NBFCs. They have leveraged on this information to expand their retail lending business manifold, while keeping delinquencies in check. But with CICs interacting directly with lenders, retail borrowers are often left out of the loop. They have had to contend with the CICs’ opaque functioning and poor service standards.

There has been a rising tide of complaints about inexplicable changes to scores, delays in updating loan closures, lack of response to requests for correction, identity theft leading to wrong scores, and so on. It is, therefore, a good thing that the Reserve Bank of India has taken up the regulation of CICs in right earnest. After extending its integrated ombudsman scheme to credit bureaus, the RBI has now issued two new circulars that hold them more accountable to borrowers. According to new rules to take effect from April 2024, CICs will need to alert borrowers through SMS or email whenever their credit report is accessed. This can alert customers to instances of loan fraud. There have been many reported cases of doubtful operators using stolen KYC details to take loans under assumed names. Their defaults end up affecting the credit scores of bona fide consumers, without their even being aware of it.

Lenders have been asked to notify borrowers whenever they submit any information to CICs on overdue loans. This can serve as a heads-up to the borrower to either raise a dispute or settle dues. CICs have also been asked to take up requests for data correction with lenders, who are to intimate reasons for any rejection to the consumer. While all these alerts are much-needed, they are subject to the availability of consumers’ email or phone number with the lender/CIC. CICs may not be maintaining a comprehensive database of lakhs of individuals. There must be a concerted effort to enable all retail borrowers to update their contact details with CICs. CICs have been asked to incorporate data from lenders into their database or offer reasons for rejection, within seven days. Lenders/CICs are required to update credit reports within 30 days of a customer request, and pay compensation for every day of delay.

The RBI has also reiterated its earlier directive that CICs offer all individuals free access to their detailed credit reports at least once a year. Awareness campaigns by CICs and lenders will hopefully make retail borrowers aware of this facility. It would be useful if the RBI also directed CICs to disclose the actual parameters used to arrive at a retail credit score. Currently the methodology is shrouded in mystery. Making the parameters public will also help borrowers consciously improve their credit behaviour, in the process helping lenders.