Gujarat high court issues notice to bank over CIBIL score error case

If a bank admits its mistake, but fails to rectify it or repeats it, causing harm to the account holder, filing a writ petition in the High Court is the best course to seek corrective action: expert

The Gujarat High Court has issued a notice to a cooperative bank in Rajkot and the Reserve Bank of India (RBI) following a petitioner's complaint that his CIBIL score dropped due to the Rajkot bank repeatedly sending notices meant for his namesake. The intended recipient had stood as a guarantor for two defaulted loans.

 

What is the case?

 

Between February and October 2019, Rathod received multiple notices from the cooperative bank demanding repayment for two loans taken by Alpesh Baraiya and Sonalben Vaghela. The notices incorrectly identified him as the guarantor for these loans, which were defaulted upon. Rathod contended that he never signed as a guarantor for these loans and sought clarification from the bank in July 2019, questioning the legitimacy of the notices he received. He also filed a complaint with the RBI to address the matter.

 

In response to Rathod's inquiry, the bank acknowledged its mistake in August 2019, admitting about another individual with a similar name. The bank assured Rathod that it would rectify the issue to prevent further disturbances in his financial dealings. Despite this acknowledgment, Rathod's CIBIL score continued to suffer, dropping from a previous high of over 750 to 486 by January 2025, severely impacting his ability to secure loans.

 

“In cases where an individual's CIBIL score is wrongly impacted due to a namesake's financial transaction, the recourse lies in a combination of regulatory intervention and legal action. Under the Credit Information Companies (Regulation) Act, 2005, individuals have the right to dispute inaccuracies with the credit bureau. Additionally, the RBI’s Fair Practices Code mandates banks to verify borrower details thoroughly before reporting defaults, making them liable for wrongful reporting,” said Rajesh Jangra, founder, The Chambers of Jangra & Associates.

 

“This is a fit case of negligence on the part of the concerned Bank and for directions to RBI because of its inaction against the said bank. In such cases where the bank acknowledges its mistake but does not take steps to rectify or commits the same which, in turn, causes injury to the account holder, it is best to approach the high court under writ jurisdiction seeking directions against the bank and the RBI both of which are state controlled and regulated bodies,” said Shashank Agarwal, advocate, Delhi High Court.

 

What should you do if you face such circumstances?

 

“In addition to filing a dispute with CIBIL, you should directly contact the bank or financial institution responsible for the incorrect information. Inform them of the error, provide necessary details, and request an immediate correction. Ensure that you receive written confirmation once the correction has been made. After the necessary changes are implemented, it is advisable to monitor your CIBIL report regularly to confirm that your credit score accurately reflects the corrections,” said Akash Lamba, senior associate, SKV Law Offices.

 

“If the issue persists despite these efforts, seeking legal recourse may be necessary. Consulting a legal professional can help you explore further options, such as filing a complaint with consumer courts or relevant authorities to address the erroneous credit reporting,” Lamba said.