Citi, StanChart create card trauma

Khyati Dharamsi/Vivek Kaul

Customers denied loans because banks have wrongly reported overdues to Cibil

MUMBAI: Have you ever been denied a bank loan or credit card on the pretext that you have a bad credit record? And this when you have been paying all your home loan EMIs and credit card bills on time?

Welcome to the dubious world of easy banking. Easy for the bank, tough for some unwary customers.

Take the case of Chandan Lunawat, who heads a commodities export business. He was shocked to learn from his bank that his loan request had been rejected because he owed Citibank Rs3.69 crore on a credit card. The bank that had rejected his loan application had essentially checked with the Credit Information Bureau (India) Ltd (Cibil) database and found this information.

Cibil is a one-stop shop for banks to check the credit histories of individuals.

Lunawat told DNA he had been regularly paying his credit card bills and auto loan EMIs. On being denied the loan, he asked the bank for his credit report, which a bank is obliged to give once it rejects a loan application. That’s when he discovered that he “owed” Citibank Rs3.69 crore on a credit card that was started in July 1995 and closed in October 1995.

“I have never held this credit card which is mentioned in the report,” Lunawat says. “I took up this issue with the bank (Citibank) and they promised me that my name will be removed from the list immediately. But till date it has not been removed,” he told DNA.

Citibank says Lunawat had outstandings on his Diners/Citibank credit card as in July 2006 and that’s why he was reported to Cibil “as per regulatory requirements”.

The bank agrees that it had issued a “no dues outstanding letter” to the customer following a “mutually satisfactory settlement with the customer in August, 2006,” and has promised to correct the customer’s credit history with Cibil “at the earliest.”

In theory, it looks like all’s well that ends well.

But customers need to ask why a settlement reached in August 2006, is not reflected in Cibil’s database two years later? In an era where banks are used to growing at 30-40% every quarter, acquiring customers seems more important than servicing them.

Lunawat’s is not the only case where callous banks have failed to do justice to customers.

According to the Credit Information Companies Rules, 2006, a bank has to send across corrected information to credit information bureaus - in this case Cibil - within a period of 21 days.

In case there is a settlement between the borrower and the bank or the borrower repays his dues, then the bank needs to inform the credit information bureau within 30 days. In Lunawat’s case, more than 20 months have passed and Citibank does not appear to have updated the information.

Vishal Gohil, an employee of Tata Motors in Pune, has a similar story to share. He had applied for a credit card with Standard Chartered Bank. The bank issued a health insurance policy along with the card, something that Gohil did not want. After much effort, he was able to get the insurance policy cancelled.

But the bank continued billing his card for the premium on the health insurance policy he didn’t ask for. This amount Gohil refused to pay and as a result he was reported as a defaulter on Cibil’s database.

He took up the issue with the bank and the latter agreed to reverse the charges, as well update his status on Cibil’s database. But that obviously didn’t happen. “I sought a loan from ICICI Bank, but the bank never responded. Later, when I applied for a loan at HDFC Bank, I got to know that my status was showing as a defaulter on the credit report.

“Later I followed up with my earlier bank (Standard Chartered Bank) and received a confirmation that the data had been updated. Yet, three to four months down the line when I approach banks, I am denied loans”, says Gohil.

Standard Chartered claims it has updated the Cibil database and informed Gohil that there is no outstanding against his name, but the trauma of being called a defaulter and being denied a loan stays with the customer.

People have also suffered because of the lackadaisical attitude of banks to customer concerns. Take the case of Tejinder Singh (name changed on request). Singh got a divorce from his wife some time back. His wife had an add-on card on his credit card. He asked the private sector bank to stop his wife’s add-on card. The card wasn’t stopped. In fact it is still active. “My ex-wife has been on a spending spree and I have refused to pay the money she has been spending after the divorce”, says Singh.

In the meanwhile, the bank has updated his data with Cibil and Singh is now a defaulter as he has refused to pay up money spent by his ex-wife through the add-on card. “I approached a bank for a personal loan recently and was denied one. The bank told me that I had not cleared my credit card bills fully,” he says.

What these examples clearly show is that currently individuals are largely at the mercy of banks when it comes to the kind of credit standing they have.

So what do you do when the bank you have approached for a loan is not ready to give you one because they say you have a bad credit record when you really don’t have one? The first thing to do in such a situation is to get your credit report from the bank. “Then they should take up the issue with Cibil through a bank,” says Sujan Sinha, senior vice-president - retail assets of Axis Bank.

The way the situation stands currently, individuals are largely at the mercy of banks when it comes to get their credit record corrected. Having said that, market sources point out that Cibil is in the process of preparing an Internet-based solution which would allow individuals to access their credit reports at a nominal cost of Rs 100. That still won’t solve the problem of banks declaring you as defaulters through sheer callousness.