CIBIL Score Updation Borrower's Statutory Right; Credit Information Companies Bound To Consider Objections : Kerala High Court

The Kerala High Court has held that updation of CIBIL score is a borrower's statutory right and therefore, credit rating agencies are legally bound to consider objections against the rating given to a debtor.

A single bench of Justice N Nagaresh made this significant pronouncement in the case Sujith Prasad v The Reserve Bank of India and others.

The Court noted that credit rating agencies are formed under and regulated by the Credit Information Companies (Regulation) Act, 2005. It referred to Section 21(3) of the Act, which mandates that the credit information company must update the information by making appropriate addition or deletion on a request made by the borrower.

Since credit ratings have civil consequences, impacting the financial credibility of a borrower, the credit information companies must consider the objections raised by borrowers.

"In view of the fact that credit score given by the credit information companies like the 3rd respondent can have serious adverse civil consequences on individuals, the 3rd respondent is bound to ascertain the true state of affairs with its member-Banks/financial institutions, whenever any anomaly is pointed out by individuals. Updation of credit information is a statutory right of a borrower or client of a Credit Institution, in view of Section 21(3) of the Act, 2005".

The Court was considering a writ petition filed by a lawyer, who was aggrieved with the adverse CIBIL reports given by the ICICI Bank Ltd. The petitioner submitted that the CIBIL reports were not updated with the fact that the loan amounts were cleared.

The credit information company, Trans Union Cibil Limited, told the bench that it merely enters the information given to it by banks. Since it acts only as a mere repository of information, it is not bound to ascertain the correctness of the information given to it by the banks, the company argued.

However, the court held that the CIBIL agency is bound to verify the information on an objection raised by the borrower.

"A credit score is a numerical expression based on an analysis of the credit history of an individual. A credit score in effect represents the creditworthiness of an individual. Credit scores are used by Credit Institutions like banks and other financial entities to evaluate the potential risk passed by lending money to consumers and to mitigate loans due to bad debt. By the very nature of credit score, it has positive or negative impact on the financial credibility of an individual", the Court observed.

The Court noted that the CIBIL company in the instant case had forwarded the petitioner's grievances to the bank. However, the bank did not respond to the same.

In view of the statutory right of the borrower for updation of CIBIL score, the Court directed the ICICI Bank to respond to the mail of CIBIL agency seeking confirmation on the complete account details in respect of the petitioner, within a period of two week.

"The 3rd respondent,on receipt of such information, should make changes in the credit report in respect of the petitioner if found warranted on the basis of information provided by the 2nd respondent,without further delay", the Court ordered in conclusion.

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