Paid loan in full but CIBIL not updated? Bank ordered to pay customer Rs 20,000

A Haryana District Consumer Commission has held Axis Bank liable for deficiency in service for failing to issue a no-dues certificate and update a man’s CIBIL record despite full repayment of the vehicle loan.

President Jaswant Singh and members Neeru Agarwal and Sarvjeet Kaur directed the bank to rectify the CIBIL (Credit Information Bureau (India) Limited) record, issue an NOC, and pay Rs 20,000 as compensation and litigation costs.

“When there was nothing due against the loan amount, then it was the duty of the bank to remove the name of the complainant from the CIBIL, but the bank did not do so. Hence, the act of the bank for not issuing the NOC on clearing the loan amounts to deficiency in service and unfair trade practice on the part of the bank,” the consumer body held on July 2.

The order added that the complainant has cleared the entire loan and that nothing is due on the loan amount. It continued that the said fact has not been denied by the bank, but till date, neither has the bank issued the no dues certificate nor has the CIBIL of the complainant been updated by the opposite party.

CIBIL score is like a financial report card. It’s a three-digit summary of your credit history, rating how responsibly you handle borrowed money.

‘Wrongful loan default’

The man has taken a loan of Rs 12.90 lakh for purchasing a vehicle, and claimed that he had paid monthly instalments of Rs 41,625 for 3 years regularly, and the amount was auto-debited from his account according to the payment schedule.

The instalment, the man claimed, was unexpectedly increased to Rs 58,497 from the regular Rs 41,625 and was not auto-debited on March 1, 2023, despite having Rs 1 lakh in his HDFC Bank account, which was the source of debiting.

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The customer wrote to Axis Bank on March 17, 2023, seeking a no-dues certificate before the end of the financial year on March 31, 2023. He alleged that the lender bank neither deducted the last EMI nor issued the certificate.

He later sent emails on August 28 and 31, 2023, respectively, to Axis Bank and informed that though the EMI was supposed to be deducted, he had availed the EMI moratorium (temporary pause on loan payments) in June, 2020.

The man, however, later paid the 42nd and final instalment by cheque on September 2, 2023, which was encashed on September 4, 2023. He then sent several emails between September and October 2023 requesting a no-dues certificate, stating that the delay was affecting his CIBIL score. However, the lender bank did not respond to his requests.

The complainant sought reimbursement, a no-dues certificate, and correction of his CIBIL record, alleging the lender wrongly marked his loan as overdue despite full repayment. Claiming business losses and harassment, he protested the outstanding demand, obtained a foreclosure letter, and paid Rs 25,539 to close the loan account.

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Availed moratorium during Covid: Bank

Claiming the facts had been suppressed by the borrower, Axis Bank argued that the loan was to be repaid in 36 monthly instalments of Rs 41,625 each. However, it claimed that the customer “intentionally” didn’t disclose that he had availed the moratorium period for five months during the COVID-19 period and didn’t pay the monthly instalments for five months, i.e., the 7th to 11th instalments.

The bank further claimed to have paid the additional amount into the man’s loan account during this period. The man was alleged to have known about the outstanding amount since the moratorium period was provided to him.

Issue NOC, correct CIBIL: Order

The commission noted that the complainant availed a vehicle loan from the bank, amounting to Rs 12.90 lakh. The said loan amount was to be repaid in 36 monthly instalments of Rs 41,625. It added that due to the spread of COVID-19, the complainant has not deposited the instalments for five months; thus, the monthly instalments were increased from 36 to 42 instalments.

Considering that at the time of the last instalment, a sufficient amount was lying in the account of the complainant, but the instalment was not deducted by the bank, the forum allowed the complaint and directed the bank to issue the no-dues certificate regarding the loan in question and return the documents to the complainant, taken at the time of sanctioning the loan.

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Takeaway

This ruling reinforces that banks remain accountable for promptly issuing No Due Certificates and correcting CIBIL records once a loan is fully repaid. It recognises that delays can unfairly damage a borrower’s creditworthiness and business prospects, treating such inaction as a deficiency in service under the Consumer Protection Act.

Consumers facing similar grievances may contact the consumer helpline in their respective states (Haryana helpline: 1800-180-2087) or dial the National Consumer Helpline at 1915 for assistance.