If you are stuck in such a situation, here is what to do.

Mr. Alok Sharma, a resident of Jabalpur, found himself in a distressing situation when his credit score was severely damaged due to an error by his bank, “Global Trust Bank.” Mr. Sharma stood as a guarantor for an education loan taken by his sister, Priya. The monthly instalments (EMIs) were set up for automatic deduction from his account via an ECS mandate.

A few months ago, the bank’s ECS system erroneously debited an amount that was slightly less than the actual EMI. Unaware of this discrepancy, as he did not have direct access to the loan account details, Mr. Sharma continued to maintain sufficient balance in his account. To his shock, a recovery agent from Global Trust Bank visited his family home recently, causing immense stress to his elderly mother, and claimed the loan was in default.

Mr. Sharma immediately contacted the bank, explained that the fault lay with their automated system, and even provided his account statement as proof of available funds. He promptly cleared the small outstanding amount. However, what followed was a nightmare. The bank reported the loan as “Overdue” to the credit bureaus, causing Mr. Sharma’s credit score to drop drastically. His attempts to rectify this with the bank’s customer care and even the Principal Nodal Officer were met with generic replies and requests for more time, without any resolution.

Advice in such cases

If you find yourself in a similar situation as Mr. Sharma, where a bank’s mistake has negatively impacted your financial health and credit history, it is crucial to act systematically.

• Document Everything: Keep a record of all communication with the bank. This includes emails, reference numbers of phone calls, names of the officials you spoke with, and dates. Preserve copies of your bank statements, the loan agreement, and the ECS mandate.
• Formal Written Complaint: Send a formal, written complaint to the bank’s grievance redressal officer or nodal officer. Clearly state the facts, mention the error on the bank’s part, the damage caused to your credit score, and the resolution you seek (i.e., correction of the credit report and compensation for harassment).
• Approach the Banking Ombudsman: If the bank does not resolve your issue within 30 days or if you are not satisfied with their response, you can file a complaint with the Reserve Bank of India’s (RBI) Banking Ombudsman. This is a free and effective mechanism for resolving disputes with banks.
• File a Consumer Complaint: A bank’s failure to provide proper service, leading to financial loss and mental agony, is considered a “deficiency in service” under the Consumer Protection Act, 2019. You can file a case in the appropriate Consumer Disputes Redressal Commission.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

This issue primarily falls under civil and consumer law, rather than criminal law.

• The Consumer Protection Act, 2019: This is the most relevant law. The bank’s actions constitute a “deficiency in service” and “unfair trade practice.” You can seek not only the correction of your credit report but also compensation for the mental harassment and any financial loss incurred.
• The Banking Ombudsman Scheme, 2021: Governed by the RBI, this scheme provides a platform to address complaints against banks, including those related to credit information reporting, loan issues, and failure to meet commitments.
• The Credit Information Companies (Regulation) Act, 2005 (CICRA): This Act regulates credit information companies (like CIBIL, Experian, etc.) and the credit institutions (banks) that provide data to them. It mandates that the information provided must be accurate and provides a mechanism for rectifying incorrect data.
• Bharatiya Nyaya Sanhita (BNS): While this is a civil matter, if it can be proven that the bank acted with malicious intent to cause wrongful loss, provisions related to cheating (Section 318 of BNS) could potentially be explored, although this is rare in such cases.

If you are the complainant

As the guarantor (like Mr. Sharma), you have specific rights as your financial health is directly impacted.

• Gather Your Proof: Collect all documents that prove you were not at fault. This includes your bank statements showing sufficient balance and the ECS debit of the wrong amount.
• Send a Legal Notice: Through a lawyer, send a legal notice to the bank. This formal communication often prompts quicker action from the bank’s legal department. The notice should demand immediate rectification of the credit report with all credit bureaus and an apology.
• File the Complaint: If the notice is ignored, proceed with filing a complaint before the Banking Ombudsman and/or the Consumer Commission.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If you are the primary borrower (like Priya in this story), the default impacts your credit history as well. You should act in concert with the guarantor.

• Coordinate with the Guarantor: Work together with your guarantor to build the case. Your loan account statement is a key piece of evidence.
• Communicate with the Bank: As the primary account holder, you should also formally write to the bank, pointing out the error and the subsequent damage to your credit profile.
• Be a Co-Complainant: You can be a co-complainant along with the guarantor in any legal action, whether before the Ombudsman or the Consumer Commission. This strengthens the case.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

The police generally do not have a direct role in such matters. This is a civil dispute between a consumer and a service provider (the bank). If you approach a police station, they will likely advise you that this is not a criminal case and will direct you to pursue civil remedies like approaching the Consumer Commission or the Banking Ombudsman. Police intervention would only be warranted if there were elements of criminal fraud, forgery, or criminal intimidation by recovery agents, which needs to be proven separately.

FAQs people normally have

• Can the bank reverse the negative entry in my credit report?
  Yes. If the bank acknowledges its error, it can and must send a rectified report to all the credit information companies it reports to. This will correct your credit history, and your score should be restored.
• Is it better to go to the RBI Ombudsman or the Consumer Court?
  You can approach the RBI Ombudsman first as it is a faster and cost-free process. If you are not satisfied with the Ombudsman’s decision, the option to approach the Consumer Court is still open. You can also approach them simultaneously.
• Can I sue the bank for mental harassment?
  Yes. In a complaint before the Consumer Commission, you can claim compensation for the mental agony, harassment, and financial loss caused by the bank’s deficiency in service.

What evidence is required?

To build a strong case, you will need the following evidence:

• The loan agreement clearly stating the EMI amount and terms.
• The ECS mandate form.
• Bank statements of the account from which the EMI was being debited, proving sufficient funds were available.
• Loan account statements from the bank showing the incorrect debit and subsequent default marking.
• Your credit reports from bureaus like CIBIL, Experian, etc., showing the score before and after the incident.
• Copies of all written communication (letters, emails) with the bank, including complaints and their responses.
• A record of phone calls (date, time, person spoken to, and summary of conversation).

How long will the investigation take?

The timeline can vary:

• Bank’s Internal Grievance Redressal: Banks are supposed to resolve complaints within 30 days.
• Banking Ombudsman: The process can take anywhere from a few weeks to a few months, depending on the complexity of the case. The aim is to resolve it within 30 days of the complaint being accepted.
• Consumer Commission: A case in the consumer court can be a longer process, potentially taking several months to over a year for a final resolution.

Advocate Sudhir Rao, Supreme Court of India