Credit Information Companies Act 2005: Credit Report Correction Rights

A borrower's credit record is a biography written by other people. Every loan taken, every instalment paid or missed, every guarantee given and every settlement accepted is reported by lenders to companies the borrower never chose, condensed into a score, and read by every lender he approaches afterwards. A wrong entry in that record can shut a person out of credit as effectively as a court decree, which is why the law treats credit information as a regulated activity, gives the borrower enforceable rights in his own record, and now puts a daily price on delay in correcting it.

1. Why credit information is regulated

Lending runs on information the borrower has and the lender lacks. A shared record solves that, but it creates a new problem: the record is compiled without the borrower's participation, it follows him everywhere, and an error in it is invisible to him until a loan is refused. The Credit Information Companies (Regulation) Act, 2005 answers both sides. It makes the sharing lawful and compulsory, so that the record is complete, and it imposes duties of accuracy, security and correction, so that the record is fair.

Figure 1: The five participants and the regulator

2. The scheme of the Act

• A credit information company is a company formed for collecting, processing and collating credit information and providing it to its members and specified users. It requires a certificate of registration from the Reserve Bank under Sections 4 and 5, which may be cancelled under Section 6. Four companies are registered at present: TransUnion CIBIL, Equifax, Experian and CRIF High Mark.
• A credit institution, under Section 2(f), covers banking companies, cooperative banks, non-banking financial companies, public financial institutions, state financial corporations, housing finance institutions and credit card companies, and any other institution the Reserve Bank specifies. Section 15 requires every credit institution to be a member of at least one credit information company, and the Reserve Bank has directed that lenders be members of all the registered companies, so that no record is partial.
• Credit information, defined in Section 2(d), covers the amounts and nature of loans and advances and other credit facilities, the nature of security, the guarantees given, the creditworthiness of the borrower, and matters the Reserve Bank considers necessary.
• Section 17 entitles a company to require its members to furnish credit information, and obliges the member to provide it and to keep it updated.
• A specified user, under Section 2(l), is who may receive a report: a credit institution, a credit information company that is a member under Section 15, and the further persons or classes the Reserve Bank admits by regulations.
• Sections 19 and 20 impose the duties of accuracy and security: information must be accurate, complete and protected against loss and unauthorised access, and every company and institution must adopt privacy principles on collection, use and disclosure.
• Section 22 penalises unauthorised access to credit information, Section 23 sets out the offences and penalties for false statements and other contraventions, and Section 25 lets the Reserve Bank impose monetary penalties after a hearing; its powers to determine policy, give directions and inspect sit in Sections 10 to 12.

3. The borrower's rights in the record

Figure 2: Five rights, in the order they are used

• Access. Under Section 21(1) and (2), a person who applies for credit may ask the credit institution for a copy of the credit information it obtained from a credit information company, and the institution must provide it. The Reserve Bank has gone further by direction: every company must give each individual, once in a year, one free full credit report including the score, on request through its website.
• Correction. Under Section 21(3), a borrower may request that credit information which has not been updated be updated, corrected or added to. The update must be made within 30 days of the request, the correction must be certified by the credit institution concerned, and no change is made while a dispute about the entry is pending before an arbitrator, tribunal or court.
• Notice of default reporting. Lenders are required by direction to inform the borrower when they submit default information about him to the companies, and to report suit filed and wilful defaulter status accurately, because those tags are the heaviest in the system.
• The Ombudsman. Credit information companies were brought within the Reserve Bank Integrated Ombudsman Scheme in 2022, so a grievance that the company does not resolve goes to the same free forum as a complaint against a bank.

4. The compensation framework for delay

The 30 day duty in Section 21 had no consequence attached to it, and corrections drifted. The Reserve Bank's circular of 26 October 2023, issued under the Act, attached one, with effect from April 2024.

Figure 3: The correction clock, and who pays when it runs out

• A complainant is entitled to ₹100 per calendar day where the complaint is not resolved within 30 calendar days of its filing with the credit institution or the credit information company.
• Within the 30 days, the credit institution has 21 days from being informed to furnish the corrected information to the companies; the company has the remaining 9 to resolve. Whichever of them caused the delay bears the compensation.
• The compensation is credited to the complainant's bank account within five working days of resolution, and the complaint is resolved when the corrected report is sent to the complainant.
• Separately, companies must send the customer an alert by text message or electronic mail whenever his credit information report is accessed by a specified user, and institutions must alert him when default information is submitted, which turns the record from a silent file into one the borrower can watch.

5. What the record does inside the lending system

• Consulting the record is now mandatory, not optional: lenders must pull the report at appraisal, and the microfinance framework turns on it, since the cap of 50 per cent of household income on loan repayment obligations can only be checked against the reported borrowings.
• The record is also where the fraud and wilful default frameworks land. Classification as a wilful defaulter or as a fraud reaches every lender through the reports and the Central Fraud Registry, which is why the Supreme Court insisted on a hearing before classification.
• A settlement is reported as settled rather than closed, and the difference matters: a settled account signals that the lender accepted less than was due, and it depresses the score for years, which borrowers are rarely told when they settle.
• Since 1 January 2025, credit institutions must report credit information to the companies fortnightly, as on the 15th and the last day of each month, within seven days of the fortnight, and the companies must load it within five days, so that the report a lender pulls is weeks old rather than months.

6. Quick Revision

1. Credit information sharing is both authorised and compelled by the Act, which is why it does not breach the duty of secrecy.
2. Membership and reporting are obligations of the lender; accuracy is an obligation of both lender and company.
3. The borrower's remedies run in order: see the record, dispute the entry, 30 days, compensation, Ombudsman.
4. Alerts on access and on default reporting make the record visible to its subject.
5. A settled account and a written off account are adverse entries even though the dispute with the lender has ended.

7. Frequently Asked Questions

Can a bank report a customer to a credit information company without his consent?

Yes, and it must. The reporting obligation arises from Section 17 of the Act and the Reserve Bank's directions under it, and the customer's consent is not the source of the authority. The banker's duty of secrecy is subject to disclosure under compulsion of law, and this is such a compulsion. What the customer is entitled to is not a veto but accuracy: the entry must be true, complete and updated, he must be alerted when default information about him is submitted, and the correction machinery with its daily compensation stands behind those rights.

A loan I repaid years ago still shows as outstanding. What is the route?

Dispute it with either the lender or the credit information company; both are obliged to act. The lender has 21 days to furnish the correction to the companies and the company has the balance of the 30 days to resolve and send the corrected report. Beyond 30 days, compensation of ₹100 a calendar day accrues automatically against whichever of them caused the delay, credited within five working days of resolution. If the outcome is a refusal or silence, the complaint goes to the Integrated Ombudsman, free of charge, and a consumer commission remains open for consequential loss, since a false entry that costs a borrower a loan is a deficiency in service.

Does paying off a settled account restore the score?

Not by itself. A settlement is reported with that character, because the lender accepted less than the contractual due, and the entry remains adverse even though nothing more is payable. The cleaner course, where the borrower can manage it, is to pay the residual difference and have the lender report the account as closed, which lenders will often accept because the write back benefits them too. What a borrower should never do is pay a third party who promises to delete a true entry: accurate information cannot lawfully be removed, and the companies' correction machinery exists only for entries that are wrong.

Who may see my credit report?

Only a specified user, and only for a permitted purpose. The class covers credit institutions considering an application or monitoring an existing facility, member credit information companies, and the further categories the Reserve Bank admits by regulations, each within its purpose. Every access by a specified user now generates an alert to the customer, and unauthorised access is an offence under the Act. An employer, a landlord or a curious stranger has no route to the report, and a lender that pulls reports without a live purpose answers to the Reserve Bank for it.

8. Related Topics and Provisions

• Principles of lending and credit appraisal
• Resolution of stressed assets and the treatment of wilful defaulters
• The duties of a banker: secrecy, care and honouring cheques
• Financial inclusion and the regulation of microfinance
• The Reserve Bank Integrated Ombudsman Scheme, 2021