Can the industry fix the issue of disputes hurting credit scores?
Disputed transactions or even wrong entry of details can end up hurting your credit history and, effectively, your credit score even if it is the merchant’s or bank’s fault. What’s worse, you may not even realize that your credit score has been affected until you apply for a loan or a credit card, which could be after years together. In such situations, the onus lies on you to fix the issue, with little help from the credit bureaus or the concerned financial institutions. Mint asks four experts if the industry can put in place a better mechanism to resolve such problems
Adhil Shetty, CEO, BankBazaar
Better to settle the payment and dispute the charges later
There are two aspects to safeguarding the credit score. The first is to proactively monitor the credit score to check for incorrect personal information and credit details. This helps you take corrective action sooner. The next is to understand the chain of action very clearly so that you react promptly.
If you notice an unauthorized transaction on your credit card account, report it immediately to your card provider via the fastest channel available and get an acknowledgement and reference ID. Escalate the matter to the legal authorities in case of fraud and to the banking ombudsman or the consumer forum if the response from the lender is not satisfactory.
In case of a dispute, our natural instinct is to not pay until the dispute is resolved. However, dispute settlements can often take a long time. So the most practical course of action is to pay up, then dispute, and then get the money reversed so that your credit scores are intact during the entire period.
Finally, instead of calling, write to the bank or the bureau and save the responses, This kind of documentation helps.
Parijat Garg, Former senior vice president, CRIF Highmark
Monitoring services can be set up to alert the consumer
A credit bureau has limited control on the underlying raw data. A consumer should preferably check her credit score once every six months, especially if she has a loan, an overdraft or a credit card that is not closed. Here are some steps that can be taken to protect the consumers.
Monitoring: Credit bureaus and fintechs can partner to introduce monitoring services, which can inform about any significant changes on the consumer’s credit profile; similar to an SMS alert. This can allow a timely reaction from the consumer.
Length of data: To reduce the impact of legacy and evolutionary issues with data quality, RBI should consider limiting the display of only the last 84 months (seven years) of credit history on the credit report. This will save consumers from long-pending historical data issues and give them an opportunity to start afresh.
Review mechanism: RBI could also consider periodic supervision on the incoming data quality and enforce timely closure on consumers’ complaints regarding incorrect data by the reporting lenders.
Hrushikesh Mehta, Country manager India, Clearscore Technology Services
Credit history should be wiped off every 5-7 years
I have a slightly different perspective about this. People end up finding faults with the banks and bureaus but the onus is primarily on the individual in case it’s a disputed transaction. If you’ve made a purchase and swipe your card, you must check the value entered on the card machine. If you’ve missed that, keep a tab on the SMSes you receive. Visa and MasterCard have a charge-back guideline and once a consumer applies for it, the charge is reversed and the onus falls on the merchant to prove the value and service offered. If the merchant is able to prove the transaction was right, what can the bank or the bureau do? The ideal thing to do in a situation like this is to pay the bill and take the merchant to a consumer court.
Also, each time you buy any financial product, understand all the costs. Avoid buying from direct selling agents as they may not reveal all the costs. If it’s a clear case of mis-selling, a credit bureau can’t do much. One thing the regulator can do is to mandate wiping off credit history every five to seven years so that you’re not penalized today for a dispute that took place years ago.
Mrin Agarwal, Founder director, Finsafe India and co-founder, Womantra
Set up a body to deal with bureau-related grievances
I have been in a situation where my credit card was used fraudulently overseas even though I was in India. Initially, based on my passport, the bank reversed the charge but after a few months, debited the amount again. When I checked, I was told that the merchant classified this transaction as genuine and I would have to pay the requisite amount. Beyond a point, it is very difficult to deal with the bank call centres and such queries are not entertained in the bank branches. So, customers should either pay the amount or let it affect their credit score.
It would be useful to have an independent body set up under the banking ombudsman to deal with bureau-related grievances, which can be reached out to if the bank or the credit reporting company does not help the customer.
Further, there must be timelines prescribed for resolution of the complaint. This can be similar to the dispute resolution process used by the banking ombudsman. We must also be more careful and not sign on blank forms and check the amount entered by the merchant on the card machine.
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