Credit Information Companies

Credit Information Companies

Subject :Economy

Context–

Credit Information Companies (CICs) will have to appoint an Internal Ombudsman by April 1, 2023, according to the framework announced by the Reserve Bank of India.

Details:

• Every CIC should appoint an Internal Ombudsman for a fixed term of not less than three years, but not exceeding five years.
• The IO should be either a retired or a serving officer, not below the rank of Deputy General Manager or equivalent, in any financial sector regulatory body, CIC, a NBFC or bank, with at least seven years’ experience in banking, non-banking finance, financial sector regulation or supervision, credit information or consumer protection.
• The Internal Ombudsman will not handle complaints received directly from the complainants or members of the public and, instead, deal only with complaints that have already been examined by the CIC, but have been partly or wholly rejected by it.
• Outside the purview:
  • Complaints related to fraud, misappropriation, etc., except those resulting from a deficiency in service, if any, on the part of the CIC will not be under the purview of the ombudsman.
  • Complaints/ references relating to internal administration, human resources, or pay and emoluments of staff will also be outside the purview.

Credit Information Company (CIC)

• Credit Information Company (CIC) is an independent third-party agency that collects financial data of individuals pertaining to their loans, credit cards and other related information and shares with its members, who generally happen to be banks and other financial institutions.
  • This data is provided to CICs by their member banks and other financial institutions.
• As per the definition, a Credit Information Company:
  • Needs to be a company that was formed and registered under the Companies Act, 1956
  • Is granted a Certificate of registration under sub-section (2) of Section 5, of CIC Act, 2005.
• Based on the data of the individuals, a Credit Information Company prepares a Credit Information Report and a Credit Score. 
  • Credit history of an individual is classified by a CIC into two categories: Negative data and Positive data.
  • When an individual applies for a loan/credit with a lender such as a bank or Non-Banking Financial Company etc., the lender contacts their Credit Information Company to get the Credit Score and Credit Information Report of the applicant-borrower.
• All the CICs in India are licensed by the Reserve Bank of India (RBI).
  • CIC Act, 2005 clearly prohibits any company from carrying out the business activity of credit information, without having the Certificate of Registration from RBI.
• They  are governed by the provisions under Credit Information Companies Regulation Act (CIC Act), 2005 and other RBI regulations and guidelines. This was further followed by Credit Information Companies, Regulations and Rules Act, 2006.
• Currently, there are four CICs — Credit Information Bureau (India) Ltd (CIBIL), Equifax Credit Information Services Pvt Ltd, Experian Credit Information Company of India Pvt Ltd and CRIF High Mark Credit Information Services Pvt Ltd.