Updating 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. The Kerala High Court presided J. N. Nagaresh laid down this ratio in the case of Sujith Prasad Vs. Reserve Bank of India & Ors., [W.P. (C) No. 22108 of 2020].
The brief facts of the case are that a lawyer filed a writ petition in the court aggrieved with the adverse CIBIL reports given by the ICICI Bank Ltd. The Petitioner contended that the CIBIL reports were not updated that the loan amounts taken by him were cleared off. The Credit information company, Trans Union CIBIL Ltd., submitted that information given 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 Court in this case noted that Credit agencies are formed and regulated under the Credit Information Companies (Regulation) Act, 2005. Under the Act, Section 21(3) mandates that credit information company must update the information by making appropriate addition or deletion on a request made by the borrower. Further, observing that the credit ratings have civil consequences, that impacts the financial credibility of a borrower, hence the company must consider objection. Hence, the Court was of the opinion that, “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 in this case stated that it was the duty of the Credit agency to verify information or objections raised by the borrowers and hence was of the opinion that “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 respondent i.e. ICICI Bank was directed to update the CIBIL score and update the agency within a period of two weeks.