Dr Kirit Somaiya, Member of Parliament, on Friday launched Moneylife Foundation’s Credit Helpline (www.FreeCreditHelp.in), in the presence of, Dr Deepali Pant Joshi, executive director, Reserve Bank of India, Mohan Jayaraman, managing director, Experian India, Ranjan Dhawan, executive director, Bank of Baroda and D Venkatesh, director of Softcell Technologies.
Being reported a defaulter on a loan or a credit card has serious consequences to a person’s financial life. Unfortunately, along with poor financial literacy, the failure to understand how credit reporting works or its impact on every individual’s borrowing ability is rampant. This affects youngsters the most, because the propensity to default starts with education loans and goes on to credit card dues.
The objective of Moneylife Foundation’s Credit Helpline is to provide information, advice and preliminary guidance to persons needing help in credit related areas. This is being supported by Bank of Baroda for running costs, Experian India for the counselling support and Softcell Technologies for the technology support.
The confidential counselling will suggest ways to resolve a payment problem and even negotiate with lenders. This will prevent financial consumers from being fleeced by ‘debt doctors’. Through the use of internet and video technology, the Helpline aims to reach people in smaller towns as well.
Speaking at the event, Dr Somaiya, a Chartered Accountant & PhD (Doctorate) from Mumbai University in finance & capital markets, highlighted the need to punish the cheater who defaults. “We cannot encourage defaults. However, at the same time we need to make sure small borrowers are not punished while big borrowers are being given settlement options.”
Talking about the Credit Helpline, Mr Somaiya said,”Lets develop this concept of handholding borrowers in distress at the national level. I will try to take it up to the Ministry, the Parliament. Let us all try and stop the extortion of borrowers who may have defaulted by the recovery agents and debt doctors.”
Mr Jayaraman, who has spoken at Moneylife Foundation’s past events on credit reports, spoke about the role of a Credit Bureau and at the same time offered free credit reports to first 250 applicants through the credit helpline.
Dr Pant Joshi, Executive Director of the RBI spoke on the need for a credit helpline and she mentioned that all over the world there are strong financial regulations. In India we have wealth managers, relationship managers, yet many refrain from visiting the banks.
Mr Dhawan spoke on Bank of Baroda’s support to the credit helpline and how banks could benefit from such an offering. He said illiteracy in financial matters is very high even among educated individuals. Financial literacy at the bottom is extremely low, hence there is a lot of mis-selling that takes place. A great deal of consumers education is required, he said.
Mr Venkatesh, plays an important role in spreading the reach of the helpline. He said that technology plays a very important role for spreading the reach of the helpline. And he will always be there to support moneylife.
Often individual borrowers are ill informed or confused about the terms of credit/loan, actual interest rates applicable and the hidden charges on their loans. They are also scared of admitting financial difficulties to their lenders. Consumers who default in their payment are easy prey for “debt doctors”. Certain credit repair agencies / debt doctors charge fees that range from Rs7,000 at the lower end to as much as Rs16,000. Some agencies start from Rs3000, but have add-on costs including for obtaining the Credit Information Report (CIR), explaining the CIR and signing a Power of Attorney to represent the defaulter with banks/ financial institutions. Some ‘debt doctors’ partner with recovery and collection agents and are sometimes seen buying bad-loan portfolios from lenders and are in a position to threaten consumers with legal notices.
This is bad for the lending environment and people need and are entitled to a reasonable service that does not profit from their financial distress. Moneylife Foundation hopes to fill this gap.
Moneylife Foundation’s Credit Helpline as well as a panel of counsellors and our other resources in this initiative are free and can be availed by anyone.
We expect the Credit Helpline to go a long way in creating an informed customer base for banks and finance companies and helping solve the vexing problem of bad loans.
In fact, it is beneficial to banks as well. If a defaulter can be made to understand that he cannot renege on his obligations without consequences to himself, he will make an effort to pay at least some of the money, rather than run away. This allows banks to improve recoveries in personal credit far more than through threats and recovery agents.
Debashis Basu, founder trustee of Moneylife Foundation made a presentation about the newly launched Helpline and the process. He also mentioned the features and benefits of the helpline.
To access Moneylife Foundation’s Credit Helpline, please fill up the form available at www.freecredithelp.in. If you are a Moneylife Foundation member, your details get pre-filled in by our algorithm, for your convenience. However, you need to be logged in to www.moneylife.in to see your pre-filled details (and edit them, if needed).
• Consumers shall email/ call and Moneylife Foundation personnel shall set up a confidential meeting with counsellors, if required.
• Counselling shall be done by ex-central bankers, commercial bankers and credit bureau experts.
• The details of each case reaching out to the Credit Helpline will be opened with a standard documentation and closed with a feedback form.