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Now, Loan Defaulters Can Run But Not Hide    
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Source : The Economic Times

MUMBAI: Credit card and personal loan defaulters are finding that they have nowhere to hide. Armed with a new information service, banks are tracking down defaulters who have gone missing or moved to another town to escape recovery agents.

Now, an email alerts the bank whenever an errant borrower resurfaces to fish for a new loan—anywhere in the country. The information service is being sold by Credit Information Bureau of India Ltd (Cibil).

Till now, there was no way a lender could trace a defaulter if the person did not intimate his new address to the bank. But the central database maintained by Cibil for compiling individual credit history can spot a borrower based on parameters like date of birth and PAN number, among others.

While such services may be perceived by many as infringement of privacy, the law allows credit information companies to trade such information. Cibil MD Arun Thukral told ET that such services are within the purview of the Credit Information Act as the data is shared only among lenders.

Cibil had originally started operations as a single-service company providing lenders a history of loan transactions of a potential borrower. A typical credit history statement gives details of the various loans that an individual has outstanding and information about his repayment schedule. This information is submitted by lenders themselves and is aggregated by Cibil.

Like banks, telecom companies also grapple with defaults by users who change locations.

“We are now seen as the bad guys, but what we are doing is merely providing information that is submitted to us by other banks... There have been cases where two branches of the same bank have given loans to the same borrower,” said Mr Thukral.

In many cases borrowers have complained that information given by banks is misleading, even incorrect. Such complaints are more frequent with credit card statements carrying a disputed entry. While the borrower thinks the matter has been ‘settled’, the bank treats the disputed amount has a ‘written-off’ item.

To counter allegations that it may be reproducing false information, Cibil has decided to flag disputed items in the credit history statement.

The law provides for a 30-day window during which credit data can be revalidated. But the present process that must be followed by a borrower seeking his credit history is rather cumbersome: an application, along with a demand draft of Rs 145, has to be mailed to Cibil.

Cibil will, in turn, mail the statement to the borrower’s address on record. However, individual borrowers will soon be able to get a copy of their credit reports online with the institution tying up with a payment gateway. “We will soon be integrating the payment gateway with our website, which will enable individuals to make applications for their credit history by making the payment online,” said Mr Thukral.

Cibil has also started offering banks ‘decisioning service’, that is beyond credit history. Here, banks can use analytical tools to set their parameters to decide whether a loan seeker has the minimum credit score. “In the West, the data is used by banks not only for verifying creditworthiness of loan applicants but also to market products to those whom banks find creditworthy,” said Mr Thukral.

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