Summary of provisions of the Credit Information Companies (Regulation) Act, 2005,the Credit Information Companies Regulations, 2006 ("Regulations") and the Credit Information Companies Rules, 2006 ("Rules")
The Credit Information Companies (Regulation) Act, 2005 ("CIC Act"), is a legislation enacted by the Government of India to regulate the actions of credit information companies in India ("CIC's") in India and to facilitate efficient distribution of credit as well as for matters connected to the same. It is a complex piece of legislation and contains numerous provisions not contained on this page.
Pursuant to the CIC Act, the Reserve Bank of India and the Government of India have enacted the Credit Information Companies Regulations, 2006 ("Regulations") and the Credit Information Companies Rules, 2006 ("Rules") issued under the Act, respectively.
(The CIC Act, the Regulations and the Rules are collectively referred to as the "CIC Laws").
Should you wish to familiarize yourself with the legal framework of the CIC Laws and gain a perspective of how they would impact you, vis a vis your relationship with Equifax, feel free to access the complete text of the CIC Act, by visiting"CIC Act"as appearing below and for the complete text of the Rules and Regulations visit "CIC Rules".
Members of a CIC:As per the CIC Act only the following can become members of a CIC:
- Credit Institutions- to know who constitute credit institutions, please check Section 2 (f) of the Act by visiting "CIC Act".
- Credit Information Companies- to know who constitutes a credit information company, please check Section 2 (e) of the Act by visiting"CIC Act".
- Specified Users- to know who constitute specified users, please check Section 2 (l) of the Act and Regulation 3 of the Regulations by visiting"CIC Act"and"CIC Rules"respectively.
Collection and furnishing of information:A CIC or any person so authorised, may by a notice, requisition credit information from its members being Credit Institutions and other CICs. A CIC shall also adopt a format, with RBI approval, for collecting the requisitioned credit information and shall forward the agreed upon and approved format to its members being Credit Information and CICs. Upon receiving the notice and the format, the member Credit Institutions and CICs must furnish the requisitioned information within the time specified in the notice.
Permissible uses of the credit information:Credit information provided by every CIC to specified user can be used only for the following purposes:
- To make effective credit decisions
- To deter concurrent borrowers and serial defaulters
- To keep adverse selection of customers to the minimum
- To review and evaluate risk of its customers
- To effectively discharge their statutory and regulatory functions
- To effectively discharge the functions as a credit rating agency
- Generally in relation to and for purposes of taking credit decisions, or for judging credit worthiness if a borrower in a client, as the case may be
- To take a credit decision on a person who accepts liability for payment on a bill of exchange drawn by another person who has applied to the specified user for availing new credit facility or for review or renewal or enhancement or of extension, as the case may be , of his existing credit facility granted by the specified user,
- To take credit decision in relation to a person who draws a promissory note in favour of another person, or who has applied to a specified user for availing new credit facility or for review or renewal or enhancement or extension, as the case may be, of his existing credit facility granted by any specified user
- To take credit decision in relation to a person who proposes to act as a guarantor for another person who has applied to a specified user for availing new credit facility or for review or renewal or enhancement or extension, as the case may be, of his existing credit facility granted by any specified user
- To enable a person to know his own credit information
The CIC Laws offer great credence to sensitivity of credit information. The CIC Laws contain elaborate provisions relating to accuracy, completeness and protection of credit information collected by CIC's and credit institutions, privacy directives for CICs and members alike, and access to and security of credit information.
Dispute resolution:If any dispute arises between a CIC and its member, relating to business of credit information, for which no remedy has been provided under the Act, such disputes shall be settled by conciliation or arbitration as provided in the Arbitration and Conciliation Act, 1996 (26 of 1996).
Where a dispute has been referred to arbitration as above, the same shall be settled or decided: (i) by the arbitrator to be appointed by the Reserve Bank and (ii) within 3 (three) months of making a reference by the Parties to the dispute:
- Provided that the arbitrator may, after recording the reasons therefor, extend the said period up to a maximum period of 6 (six months).
- Provided further that, in an appropriate case or cases, the Reserve Bank may, if it considers necessary to do so (reasons to be recorded in writing), direct the Parties to appoint an arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996), for settlement of their dispute in accordance with the provisions of that Act.