India Fines Its Four Credit Bureaus As It Steps Up Consumer Protections

June 28, 2023
The Reserve Bank of India has fined the country’s four credit reporting agencies after it found inaccuracies in their credit reports and bad handling of complaints.

The Reserve Bank of India (RBI) has fined the country’s four credit reporting agencies after it found inaccuracies in their credit reports and bad handling of complaints.

The RBI said data in the credit information maintained by Equifax, Experian, TransUnion and homegrown credit bureau CRIF were neither accurate nor complete and imposed a total ₹10m ($122,800) penalty on the credit bureaus.

Additionally, when the customers complained about the inaccuracy of the data, Equifax, TransUnion and CRIF were unwilling to fix the errors.

They failed to update the credit information and often left the customer in the dark about the steps taken to fix the discrepancies or why they could not comply with the 30-day deadline to correct the information.

Fines were relatively evenly spread across the four firms with TransUnion receiving a fine of ₹2.6m ($31,690), CRIF ₹2.575m ($31,400), Experian ₹2.475m ($30,170) and Equifax ₹2.425m ($29,550).

The failures were uncovered following inspections at the firms in late March 2021 and followed an increase in customer complaints regarding credit information reporting and how well credit information companies work.

The announcement, which was the first such concerted action against the credit reporting agencies, was welcomed by industry players as a sign of an increased push for consumer protection and the accuracy of data.

The regulatory crackdown was a “much-needed step to enhance credit score accuracy and streamline the customer experience, benefiting lenders and borrowers alike”, said Bighnaraj Barada, operations manager at Axis Bank.

According to Barada, it bears significant implications for both market players and consumers.

For market players, the RBI's fine “serves as a clear message that credit rating firms must exercise greater diligence and responsibility in their assessments”.

The fact that the RBI decided to impose penalties “emphasises the need for rating agencies to improve their processes and methodologies, ensuring more accurate and reliable ratings”.

This will help market players make better-informed decisions based on trustworthy credit information.

“With improved accuracy in credit assessments, responsible lending practices can be promoted,” he added.

Meanwhile, the RBI's action provides reassurance for consumers regarding a fair and transparent credit assessment process and reinforces trust in the financial system, according to Barada.

“This promotes responsible lending practices and enhances consumers' access to credit on more favourable terms, empowering them to make informed financial decisions.”

New redress rules to increase consumer protections

In parallel with the enforcement actions, the RBI is also working to strengthen consumer protections regarding credit reporting.

In April, the RBI announced that it was working on a comprehensive framework to improve the efficacy of the “grievance redress mechanism” and customer service of credit institutions and credit bureaus.

The new regulations will create a compensation mechanism when updates to the credit information are delayed, and will allow customers to receive a text message or an email when a third party accesses their credit information.

The new rules will also include a timeframe during which credit bureaus must process the data received from credit institutions and the requirement to publish on their websites the number and nature of customer complaints that they receive.

VIXIO reached out to the credit bureaus for comment but did not receive a reply by the time of publication.

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