TransUnion-owned ‘CIBIL’ has access to voters’ registry, property registry and tax ID database and its score decides an individual’s creditworthiness.
New Delhi: The loan taking capacity of millions of Indians across the country has been impaired, either permanently or temporarily, due to a scoring system that is operated by a Chicago-based company which uses its specific sets of algorithms to determine whether the person is suitable to be given loan of any kind or not.
A three-digit number called a “CIBIL” score has for long been the last word to determine the creditworthiness of any individual. This score that starts from 300-900, however, is based on multiple factors which are not in the control of the individuals.
As per thumb rule, everyone who has a PAN card, has a CIBIL score. This score, in which 300 is the lowest and 900 the highest, is used by banks, financial institutions to decide whether the lender should be given any kind of loan, be it education, auto, personal or home loan depending on the score he is. Once these “sacrosanct scores” are considered to be acceptable enough, then the discretion of the money lenders comes into play while deciding the rate of interest at which the money would be lent.
The Credit Information Bureau India Limited, which is now known as TransUnion CIBIL Limited, was incorporated in 2000 based on recommendations made by the RBI Siddiqui Committee. In 2003 CIBIL joined hands with the US-based TransUnion which was its sole technology, analytics and decision service provider.
At that time, TransUnion was deriving revenue from royalties paid to it by CIBIL for the use of its technology, credit scores and other value-added services. Gradually, TransUnion started acquiring a stake in CIBIL which corresponded with Indian stakes holders divesting theirs.
In December 2011, it acquired 7.51% ownership bringing its total ownership to 27.5%. In 2007, CIBIL launched India’s first generic risk scoring model for banks and financial institutions. In 2010, it launched CIBIL Detect which was India’s first repository for information on high-risk activity and CIBIL Mortgage Check, the first centralized database on mortgages in India.
In 2011, CIBIL score was made available to individual consumers. By May 2014, TransUnion became the majority stakeholder in CIBIL. By 2017, TransUnion had acquired a 92.1% stake in CIBIL. In January 2018, Public sector lender, Bank of India (BoI) sold its entire 5% stake to TransUnion.
As per CIBIL’s own filings in 2019 as far as India was concerned, it has access to several non-credit data sources that it used to enhance its solutions. “These include the national voters’ registry with nearly 790 million records, as well as other sources such as the confirmed and suspected fraud registry.”
Significantly, the central government in February 2021 had stated in the Lok Sabha that the Election Commission has not shared any electoral roll data with the National Intelligence Grid (NATGRID). “The commission has stated that it has not shared any electoral roll data with NATGRID while adding that the poll panel has informed that electoral roll database is shared with departments of the central government or state governments as and when requests are received from them for specific purposes,’’ the government had told the Lok Sabha members.
TransUnion, the US-based company, according to experts, now holds records of crores of Indians which is “Sensitive Personal Information” under ITA 2000 and which will become “Critical Personal Information” under the Personal Data Protection Bill, 2019.
TransUnion collects data, not from the individual, but from the banks and it is the same data that it shares with about 2400 Indian members from the Banking and FinTech companies in lieu of a substantial fee. In essence, what was an Indian company, has now become a foreign company with data of millions of Indian citizens, the value of which is in billion dollars.
The $2.65 billion company considers India as one of its most lucrative markets as is clear from its company filings. In its March 2022 filings, India was its second largest market with a gross revenue of $45.2 million, just behind the UK. The entire Africa was a distant third.
It further added: “In the absence of a comprehensive national ID, we created an innovative matching algorithm that allowed us to create the most extensive consumer credit database in India. We also own or have access to several non-credit data sources that we use to enhance our solutions, including the national voters’ registry, the confirmed and suspected fraud registry, property registry and tax ID database. We offer a suite of risk and information solutions across the credit lifecycle for banks, telecommunication companies and insurance companies, as well as consumer solutions such as online credit reports and scores. India has become our second largest and our fastest growing region.”
Satish Jha (name changed), whose CIBIL score was 700, wanted to buy a car urgently post Covid times so that he could save his kids and wife from catching the virus while traveling in a public transport. When he approached a PSU bank, he was told that since his CIBIL score was “low”, they would not give him the loan to buy the car. Ultimately, a broker whom he befriended at the car showroom, took him to a private bank which gave him the loan at 13.2%, which was 6% above the RBI-benchmarked Marginal Cost of Funds based Lending Rate (MCLR), which is the minimum lending rate below which a bank is not permitted to lend.
Another individual who skipped some EMIs on a loan that he had taken through a digital NBFC, due to Covid-19 and repaid it fully after a few months, found that his CIBIL report had termed his loan as “written-off”. Despite reaching out to the finance company and getting a NOC from them which he shared with CIBIL, the said remark was not removed from his CIBIL report as a result of which no company is giving him a credit card.
However, there are exceptions to this where a CIBIL report is rectified by TransUnion within 48 hours. India actor Rajkumar Rao on 2 April 2022 tweeted that he has been subjected to a fraud. “#FraudAlert My PAN card has been misused and a small loan of Rs 2500 has been taken on my name. Due to which my CIBIL score has been affected. @CIBIL_Official please rectify the same and do take precautionary steps against this.”
Within 48 hours, TransUnion, in its response to the tweet, replied that it contacted the money lender and has done necessary corrections in Rao’s CIBIL report. As per TransUnion, it calculates the credit score on the credit history of an individual over past 24 months and is dependent on multiple factors like credit utilisation, type, amount and duration on credit facilities availed, month-on-month credit payment behaviour, delinquencies and defaults, written-off or settlements on credit facilities and also the credit history on loans guaranteed or co-owned by the consumer.
It claims that the score is dynamic and it changes depending on the individual’s month-on-month credit activity and payment behaviour However, in many cases that The Sunday Guardian came across, the Credit Information Report (CIR) that is generated by the agency, is a work that is full of errors, most of which are done by the money lending companies. These companies have mushroomed in the country, many of which lend money through digital platforms.
All of these companies use CIBIL scores to judge an individual’s paying capacity. Companies like Capital Float (which has tied up with online retailer Amazon), DMI Finance, Dhani loans, Non-Banking Finance Company (NBFC) like Udaan etc rely on CIBIL score to give small amount of loans (ranging from Rs 3,000 to Rs 1,00,000) which are aggressively marketed to the online buyers and are psychologically pushed to buy products for which they don’t have the required money.
However, once an individual with a “good” CIBIL score misses his EMI paying date, his CIBIL score is scarred for a long time. The Twitter account of CIBIL is flooded with complaints of people from across India, across different ages and financial backgrounds who are pleading with the institution to rectify their CIBIL scores. All these complaints have invariably been tagged to the Finance ministry and the Finance minister in the false hope that the ministry, if not CIBIL, will help them.
Sample this: “Without any reason you have decreased my CIBIL score from 783 to 702. It had taken me more than one year to reach this score. Please correct this or I will be left with no option but to commit suicide,” a user wrote to CIBIL on Twitter on 1 June.
A lower CIBIL score allows the banks and financial institutions to charge a higher interest rate from the customers. It allows the institution a strong reason to give the loan on an inflated interest rate which leads to the question on how closely the credit rating agency and the banks and NBFCs work together.
The complaints of PAN cards being used to disburse loans to non-owner of the PAN card and CIBIL getting impacted is also rampant. Unfortunately, many Indian users who are not financially educated get to know that their CIBIL score has been tainted because someone else took a loan online using their PAN details when it is too late and when they go to the bank to get a loan.
As is clear from the Twitter account of CIBIL, the organization takes months to rectify the error on the ground that it has to first reach out to the lending company for a clarification, wait for it to respond and then move to the step of rectifying the CIBIL report. However, as has happened in the case of many people, CIBIL regularly sits for months on the request for a rectification by a customer on the ground that the lending company has not responded.
“I wanted to take an AC on loan but the finance company said that I am not eligible for loan as I have defaulted on a loan earlier. I had never taken a loan earlier. So, when I downloaded my CIBIL report I was shocked to know that a loan of Rs 70,000 was active in my name. It took me a lot of effort to reach out to that NBFC and clarify that I had never taken any loan. Ultimately, they agreed and they issued a No objection Certificate. I forwarded that to CIBIL but for more than one month my CIBIL score remained the same. They would say that they are waiting for a NOC from the NBFC. Ultimately I could not buy the AC,” Sneh Pandey who is a HR manager said.
Very intriguingly, the CIBIL score of an individual decreases by 30-80 points as soon as NBFC or a bank checks his or her score and it is found to be “less”. This “jugalbandi” of inefficiency between CIBIL and finance companies has left no one untouched. A senior citizen, Surendra Mehta, on 31 May wrote on Twitter while tagging CIBIL and the Finance Ministry: “Who is responsible for the delay and damage due to mistakes at CIBIL caused to us? CIBIL takes a long time to sort out this and keeps making the same error. Anyone can put wrong information about someone on your site by paying any fees, what about the damage it causes to some one’s reputation and business? It has affected our reputation with our banker and had a negative effect on our business. Any senior person we can meet today in Mumbai? Or taking legal recourse the only respite for us?”
With no government institution acting as a supervisor, the credit rating agency, which enjoys a monopoly as far as the Indian market is concerned, has a free run despite obvious flaws in its working model and the massive harassment that people face due to it, either directly or indirectly.
The Sunday Guardian wrote and sent SMS to the spokesperson to the Election Commission of India (ECI) seeking response to whether private companies, Indian or an MNC, can use the Indian voter databases for its own use? If yes, does it need to take permission from the ECI? (2) How many such companies have been allowed to use the Indian voter database?
No response was, however, received till the time the story went to press. The Sunday Guardian also sought the following details from TransUnion. (1) Has TransUnion taken permission from the Election Commission of India to access India’s voter database for its use? If yes, when was the permission taken and what is the extent of this data it can use? (2) Has TransUnion taken permission from the Ministry of Finance to use the Tax database? If yes, when was the permission taken and what is the extent of this data it can use? (3) What is the turnaround time that TransUnion requires to resolve a complaint regarding discrepancies in the CIBIL report of an Indian consumer? (4) The Twitter handle of CIBIL has a plethora of complaints from citizens of India about discrepancies that have negatively impacted their creditworthiness. Many of them have warned of committing suicide. Is TransUnion aware of these discrepancies? What are the steps, if any, it has taken to resolve these complaints and to ensure that they are not repeated? (5) Many of the complainants have been told by TransUnion that the discrepancies in their CIBIL report can only be resolved once a clarification is received from the lender company. Is there a time limit set for such a reply from the lending company? What is the recourse available to the customer in case the lending company does not submit a clarification to TransUnion?
In her response, Ms Harshala Chandorkar, Chief Operating Officer, TransUnion-CIBIL, said: “Information is submitted to us by banks and credit institutions in a Reserve Bank of India (RBI) approved data-submission format which has a unique-identifier data field. Hence voters’ ID / PAN data for consumers is submitted to us by banks and credit institutions and we are not required to seek any permission from the competent authorities. TransUnion CIBIL is a credit information company (CIC), governed by the Reserve Bank of India through the rules and regulations specified in the Credit Information Companies (Regulation) Act, 2005. We collect and maintain the credit history of consumers and commercial entities. As per CICRA norms, it is mandatory for all credit institutions operating in India to submit credit information to CICs on a regular basis.”
Chandorkar added: “Consumer dispute resolution may take up to 30 days, depending on the time taken by the credit institution to reply. Once a dispute has been submitted to TransUnion CIBIL through our online dispute resolution platform, it gets routed directly to the credit institution concerned. If the credit institution accepts the dispute, it updates the information. A confirmation email is sent to the consumer to communicate the status of the dispute and an updated copy of the report is also sent once all the disputes are closed. As per regulation, CICs are not authorized to make any changes to the data unless authorized by the credit institution concerned.”
Chandorkar further said: “TransUnion CIBIL regularly monitors social media and online channels and responds to consumer queries and escalations received on these platforms. Our online customer response management team guides the consumers on their queries and complaints and helps resolve their issues appropriately as per our dispute resolution process.”