Normally in simple words, this is how the credit flow works in case of individual consumer:
- Consumer makes an application for the loan/credit card to the bank/financial institution.
- Bank/financial institution does the background check (like the source of income, current loan profile and other financial obligation, credit score of the applicant and other).
- If the applicant fulfills all the criteria of the bank/financial institutions. The bank/financial institutions grant him the credit facility.
- The consumer keeps on fulfilling his periodical payment obligation to the bank/financial institution.
- Bank/financial institutions keep on informing the payment habits of the individual to the Credit Information Companies by way of periodical returns.
- Credit Information Companies keeps updating the credit profile of the Individual-based on the information received from the bank/financial institutions.
- The credit profile of the individual available for the bank/financial institutions to check before giving the credit facility to the individual.
The above cycle keeps on rotating until one party fails to fulfill his obligation or start taking advantage of the situation or his position. Then what will happen?
It’s the consumer if he wants to continuously avail the credit facility from the banking system then he must be doing the following:
- Making continuous payment to the bank/financial institutions of his periodic obligations.
- Maintain a good credit score with the credit information companies.
If Consumer fails to fulfill his obligation:
Now if the consumer fails to fulfill his obligation toward the bank/financial institutions then he may end up with the following:
- Bank/Financials institution charges a very high rate of interest on the amount due from the consumer.
- Bank levy several other charges like non-payment charges, cheques dishonour charges and other different charges etc. which are also very high.
- If the credit facility to the consumer is secured then the bank/financial institutions normally sell the security and recover their dues along with different charges.
- If the credit facility is unsecured then the bank/financial institution try to defame the person be sending executives to the individual’s home or office and by making the calls to the relative of the individual.
- Bank updates the default with the Credit Information Companies (CIC’s), normally CIBIL.
- Now once the information got updated with the CIC’s. The credit profile of the consumer takes a hit and the consumer normally does not get the credit facility from any other bank/financial institution.
If the consumer commits default the bank has a higher chance to recover the amount along with the charges and that recovery amount is normally higher than the amount if the customer keeps on meeting his obligation timely.
If the Bank/Financial institution fails to fulfill its obligation:
- At the first bank never accept that there is anything wrong at their end.
- It’s the consumer who has to go through all the process to get the things corrected at the different levels of the bank.
- If there is some excess charging form the Bank/Financial institution end then it’s the consumer who has to pay first and then take the refund for the Bank/Financial institution that too by going through a tedious and time-consuming process. Also, in most of the cases, the bank deducts the charges for the account of the consumer.
- Bank/Financial institution takes advantage of being a corporate concern and play with the consumer by making him following their process. It’s the consumer who has to take his own cost-benefit decision while following up with the bank.
Form the above its quite clear that in spite of the fact whose fault it is and who is wrong at their end it’s always the consumer who has to suffer in different ways like:
- When it’s come to Bank/Financial institution turn they can take the recovery action at any day including weekends and public holidays. But when it comes to the consumer have to approach the bank/financial institutions only on a day the Bank/Financial institution is open.
- All the Bank/Financial institutions are equipped with the monetary reserves, legal team and other team dedicated for one particular activity and they do not shy away from taking advantage of the slow judiciary system of the country.
- It’s the consumer who has to make his decision whether we want to follow up with the Bank/Financial institution to devote his limited time in earning his livelihood.
- The situation becomes even worse for the consumer if the consumer is going through the issue with the different departments of the Bank/Financial institution.
- Due to their position the bank/financial institutions are at a position where they can literally blackmail the consumer by imposing different charges and higher interest if the consumer continuously wants to avail the credit facility as the consumer has no other option but to pay all those unwanted charges to maintain his good credit score.
There are very few options regarding What can be done, where to go and file the complaint? We shall be exploring alternatives in future articles.