RBI issues twin circulars to strengthen customer services relating to credit information

– Chirag Agarwal | Executive | finserv@vinodkothari.com

Introduction:

In a world where information is power and financial well-being is paramount, credit plays a pivotal role in shaping our opportunities and choices. Your credit history is a mirror reflecting your financial trustworthiness, and it’s closely monitored by Credit Information Companies (CICs) and Credit Institutions (CIs). RBI in its Statement on Developments and Regulatory Policies released with the Bi-monthly Monetary Policy Statement 2023-24 on April 6, 2023 announced that a comprehensive framework will be put in place for strengthening and improving the efficacy of the grievance redress mechanism and customer service provided by the CICs and CIs. Additionally, it was announced that a compensation mechanism will be put in place for delayed updation/rectification of credit information by the CICs and CIs . Accordingly, RBI have introduced two comprehensive frameworks on October 27, 2023 titled  “Strengthening of customer service rendered by Credit Information Companies and Credit Institutions” and “Framework for compensation to customers for delayed updation/ rectification of credit information” 

While the first circular deals with strengthening of customer services provided by the CICs and CIs in relation to access and use of credit information, the other one provides for a comprehensive compensation framework where the CICs or CIs fail to address the customer requests/ complaints within a specified period of time. 

The objective of this article is to underscore the key provisions of the circular and identify actionable steps that CIs should take in response.

Strengthening customer service 

In an effort to promote transparency and empower customers, the circular aims to strengthen the disclosure requirements and accountability of both credit institutions and CICs toward their customers. Among various other stipulations, the circular mandates that credit institutions and CICs conduct a root cause analysis of customer complaints to address issues at their origin.

The various actionables for credit institutions pursuant to this circular have been provided below:

Actionables for Credit Institutions (CIs):

• Customer Alerts for Default/DPD: CIs are now required to send SMS or email alerts to customers when they submit information to CICs related to defaults or Days Past Due (DPD) in existing credit facilities. This proactive communication keeps customers informed about their credit status.

• Awareness Campaigns: CIs should organize special awareness campaigns to educate their customers about the benefits of providing mobile numbers and email addresses. This empowers customers with the knowledge of how these details can be essential for timely communication regarding their credit information.

• Dedicated Nodal Point: CIs must designate a dedicated nodal point or official for CICs to address customer grievances promptly. This streamlines the grievance redressal process. Any change in such nodal point or officer shall be communicated to CIC within five calendar days of such a change.

• Root Cause Analysis: CIs should undertake a RCA of customer grievances at least semi-annually. Top management should review the RCA annually to identify and rectify the underlying issues leading to complaints.

• Reasons for Data Rejection: CIs should inform customers of the reasons for the rejection of their requests for data correction. This transparency helps customers better understand issues in their CIR.

Compensation Framework 

The RBI has implemented a comprehensive compensation framework to address complaints regarding credit information discrepancies. Under this framework, complainants are eligible to receive ₹100 per calendar day if their complaint remains unresolved for more than 30 days from the initial filing with a Credit Institution (CI) or Credit Information Company (CIC). The framework also outlines that if a CI fails to provide updated credit information to CICs within 21 days, they are obligated to compensate the complainant. Similarly, if a CIC doesn’t resolve a customer’s complaint within 30 days, even after receiving updated credit information from a CI within 21 days, they must compensate the complainant. The compensation amount is to be distributed proportionately among the relevant entities. This framework is designed to promote accountability and transparency within the credit reporting ecosystem.

It’s important to note that the compensation framework for credit information disputes does not apply to certain cases. These exceptions include disputes resolved under Section 18 of the Credit Information Companies Regulation Act, 2005, which involve conciliation or arbitration. Additionally, it excludes complaints related to internal administration, human resources, staff pay, commercial decisions, as well as grievances related to credit score computation or models. Furthermore, it does not cover complaints that have already been adjudicated or are pending in other forums, such as Consumer Disputes Redressal Commissions, Courts, or Tribunals. This framework is specifically designed to address credit information-related issues while allowing other avenues for resolution in exempted cases.

Apportionment of compensation between CIs and CICs

Compensation to be provided by the CICs/ CIs to the complainant (for delayed resolution beyond thirty (30) calendar days of filing the complaint) shall be apportioned among the CIs/ CICs concerned proportionately. For instance, a complaint was lodged with a CIC on January 1, 2022. The CIC initiated the grievance resolution process by seeking confirmation from the relevant CI, such as Bank A, on January 12, 2022. In this scenario, Bank A promptly provided the necessary confirmation on February 2, 2022, which aligns with the 21-day timeframe (by February 2, 2022). Bank A’s response demonstrated no delay on their part. Subsequently, the CIC efficiently resolved the complaint and furnished the corrected CIR to the complainant on February 3, 2022. Due to a slight delay of 3 days beyond the stipulated 30-day timeframe (by January 31, 2022), the CIC would compensate the complainant with an amount of ₹300. This compensation mechanism emphasizes the importance of timely grievance resolution and customer satisfaction in the credit information industry.

More examples of such apportionment can be viewed in the Annex provided in the circular.

Actionable for Credit Institutions (CIs)

Timely Resolution of Complaints: CIs should prioritize the prompt resolution of customer complaints, related to credit information discrepancies. CIs shall forward corrected particulars of the credit information to the CIC within a period of twenty-one days from the date when the CI was informed of the inaccuracy in the credit information.

Tracking and Communication: Maintain a system for tracking the progress of complaints and their resolution timelines. Inform the concerned CIC and the complainant about the total delay in resolving the complaint (in calendar days) and the compensation amount to be paid, if applicable, after the final resolution.

Incorporate Compensation Provisions: Integrate provisions in their complaint submission formats, both online and offline, to allow complainants to easily submit their contact details, email IDs, and bank account details or Unified Payment Interface (UPI) IDs for compensation disbursement.

Compensation Disbursement: Ensure that compensation amounts are credited to the complainant’s bank account within five working days of the complaint resolution, as per the framework.

Recourse for Wrongful Denial: Be prepared to address cases of potential wrongful denial of compensation. If a complainant believes they were wrongfully denied compensation, they can approach the Reserve Bank of India (RBI) Ombudsman under the Reserve Bank – Integrated Ombudsman Scheme, 2021, if the CI is covered under this scheme. If not, they can approach the Consumer Education and Protection Cell (CEPC) at the Regional Offices (ROs) of the RBI.

Training and Awareness: Train the staff to understand and implement the compensation framework effectively. Make sure that customers are aware of their rights and the compensation process.

Compliance Monitoring: Regularly monitor institution’s compliance with the compensation framework to avoid any potential penalties or issues related to delayed complaint resolution.

Conclusion:

In conclusion, the recent frameworks introduced by the RBI has brought about significant improvements in customer service within the credit reporting ecosystem. CIC and CIs now have a set of clear and robust guidelines to enhance transparency and efficiency, ultimately safeguarding the rights and interests of consumers. These actionables, including customer alerts, awareness campaigns, and root cause analysis, shall ensure that customer grievances are addressed promptly and fairly. The compensation framework further reinforces accountability by providing compensation to customers for delayed resolution of complaints, establishing a transparent process, and offering recourse in case of wrongful denial. These measures collectively contribute to a more customer-centric and trustworthy credit information environment.