Updation in CIBIL Score Borrower's statutory right

Updation in CIBIL Score Borrower’s statutory right; Credit information companies must consider objections: Kerala High Court.

On 23rd January this year, the Kerala high court announced that credit information companies have to update the CIBIL score. They need to update the borrower’s request and have named it a statutory right of the borrower. This new law has made credit information companies legally bound to consider objections of the borrower or debtor against the rating given to them. CIBIL Score is a national ranking system for MSME and many credit information companies, and lenders consider the Score of any MSME before lending them capital.

Justice N Nagaresh decided on a single bench in Sujith Prasad and The Reserve Bank of India. People consider the decision as a significant pronouncement. The court referred to section 21(3) of the constitution, making it mandatory for all credit information companies to update the CIBIL Score information by making appropriate additions or deletions on the debtor’s request. Credit Information companies have formed under the Credit Information Companies (Regulation) Act of 2005and get protected by the same law.

The court enforced this law as credit ratings have many civil consequences, even to the level of impacting the debtor’s financial credibility. It is why the court has asked the credit information companies to consider objections raised by the borrowers. We have stated the court below:

“Since credit score given by the credit information companies like the 3rd respondent can have adverse severe Civil consequences on individuals, the 3rd respondent is bound to ascertain the actual state of affairs with its member-banks/financial institutions, whenever individuals point out any anomaly. Updation of credit information statutory right of a borrower or client of a credit Institution, in view of Section 21(3) of the act, 2005.”

The court announced while considering the petition filed by a lawyer who reported that adverse CIBIL reports given by the ICICI Bank Ltd aggrieved him. He submitted the petition saying that the CIBIL reports didn’t update the fact that he had cleared the loan amounts.

The credit information company that the bank has associated with, the TransUnion CIBIL Limited, on its defense, said that it merely enters information given to it by banks. As it acts only as a repository of information, there is no legal bound for it to ascertain the correctness of the information given to it by the banks, the company said.

However, the court held that the CIBIL agency must verify the information if the borrower objects. You must understand that a credit score is a numerical expression after analyzing the individual’s credit history.

Thus one can say it represents the creditworthiness of the individual. You can find the credit scores put to use at financial credit institutions such as banks to consider and evaluate the risk involved in lending money to that individual or, in that case, any consumer. Credit scores also help to mitigate loans due to bad debt. Hence the credit score can either have a very positive or negative effect on the individual’s credibility.

In the case reported at the Kerala court, the court took into account that the CIBIL Company had instantly forwarded the petitioner’s grievances to the bank. But the bank had not responded to the petitioner.

Keeping in view the borrower’s statutory right in updating the CIBIL Score, the court commanded the ICICI Bank to respond to the CIBIL Agency’s mail and seek confirmation on the petitioner’s complete account details within two weeks.

The court also mentioned that the 3rd respondent, the CIBIL Company, must make changes on the petitioner’s credit report if the court finds them to have warranted based on information provided by the 2nd respondent, the bank, without any further delay.

 

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