RBI announces internal ombudsman mechanism for Credit Information Companies

RBI today directed all Credit Information Companies (CICs) to appoint an internal ombudsman (IO) at the top of their internal grievance redress mechanism by April 1 of 2023.

“These Directions are introduced with a view to strengthening the internal grievance redress mechanism within the Credit Information Company (CIC) by enabling a review of customer complaints before their rejection, by an independent apex-level authority within the CIC” RBI said.

According to India’s Central Bank’s direction, all the CIC shall formulate a Standard Operating Procedure approved by its Board of Directors and establish a system of auto-escalation, within 21 days of receipt, of all complaints that are partly or wholly rejected by the CIC’s internal grievance redress mechanism, to the Internal Ombudsman for a final decision.

All complaints that are partly or wholly rejected by CICs will be reviewed by the IO before the final decision of the CIC is conveyed to the complainant, it said, adding that the IO will not entertain any complaints directly from the members of the public.

Scope of role:

According to the directions issued today, the Internal Ombudsman shall not handle complaints received directly from the complainants or members of the public and instead, deal only with the complaints that have already been examined by the CIC but have been partly or wholly rejected by the CIC.

The decisions of the IO shall be binding on the CIC, except in cases where the CIC has obtained approval for disagreeing with the such decision as stated in sub-clause (g) below.

Sub-clause (g): Where the IO overrules the decision of the CIC to reject or partly reject the complaint; the CIC can disagree with the decision of the IO only with the approval of its Managing Director/Chief Executive Officer. In such cases, the reply to the complainant shall explicitly state the fact that the complaint was examined by the IO and the decision of the CIC was overruled by the IO in favour of the complainant; however, the CIC, with the approval of its Managing Director/Chief Executive Officer, has disagreed with the decision of the IO. Such a decision must be communicated to the complainant within 7 days of communication of the decision of the IO on the case to the CIC. All such cases shall be subsequently reviewed on a quarterly basis by the Board of the CIC.

Where the IO upholds the decision of the CIC to reject or partly reject the complaint, the reply to the complainant should explicitly state the fact that the complaint has been examined by the IO and, for the reasons stated in the reply, the decision of the CIC has been upheld.

For complaints that are fully or partly rejected even after examination by the IO, the CIC shall necessarily advise the complainant as part of the reply, that he/she can approach the RBI Ombudsman for redress (provided the complaint pertains to a Credit Institution / Regulated Entity that falls under RB-IOS, 2021) along with complete details of the complaint.

The following types of complaints shall be outside the purview and shall not be handled by the IO:

1. Complaints related to fraud, misappropriation, etc., except those resulting from deficiency in service, if any, on the part of the CIC.

2. Complaints/references relating to (a) internal administration, (b) human resources, or (c) pay and emoluments of staff

3. References in the nature of suggestions and commercial decisions of the CIC

4. Complaints that have been decided by or are already pending in another forum such as Consumer Disputes Redressal Commission, courts, etc.

5. Disputes for which remedy has been provided under Section 18 of the Credit Information Companies (Regulation) Act, 2005

Currently, consumers raise disputes through CICs’ websites, which are then routed to the credit institution from where the consumer has taken a loan. CICs cannot make any changes to the data unless authorised by the credit institution concerned.

The directions of RBI on the appointment of IO include the appointment/tenure, role and responsibilities, procedural guidelines, and oversight mechanism for the Internal Ombudsman. The IO shall be either a retired or a serving officer, not below the rank of Deputy General Manager or equivalent in any financial sector regulatory body, CIC, a Non-Banking Financial Company (NBFC) or bank, with necessary skills and experience of at least seven years in banking, non-banking finance, financial sector regulation or supervision, credit information or consumer protection. The IO shall not attain the age of 70 before the completion of the proposed term.