Cheated in Credit Card Settlement? Here’s What to Do

Summary

Credit Card Settlement is a process that is adopted when the customer is unable to pay his dues in full. In this process, the bank and the customer decide a certain amount by mutual consent, after which the dues are considered over. However, many times people settle without understanding this process properly or on the advice of a fake agent, due to which they have to face fraud.

In such cases, customers not only lose their money, but their CIBIL report and score also get affected. Also, it may be difficult to get a loan or credit card in future. Therefore, it is important that if someone has been cheated in the name of settlement, then he should take the right steps immediately.

First of all, collect all the documents and evidence related to the settlement. Then contact your bank and clarify the whole situation. If necessary, file an FIR with the police, especially if the fraud has happened through a fake agent. Also, inform CIBIL or other credit bureaus and apply to correct the wrong information.

Introduction

The use of credit cards has become common these days. From shopping to medical emergencies, people prefer to pay with credit cards everywhere. But while on one hand it provides convenience, on the other hand, if it is not managed properly, it can also cause a lot of trouble. When people are unable to pay their credit card dues on time, many times they often opt for ‘Credit Card Settlement‘. This is a kind of agreement in which the bank and the customer settle for a certain amount, and the remaining dues are waived off.

Although the settlement process sounds easy, it involves many risks in real life. Especially when a person decides in haste without complete information or on the advice of an agent. Now imagine, if you settled your credit card and later found out that you had been cheated – what would you do? Such fraud can take many forms – settlement through a fake agent, getting a fake receipt, or being declared a defaulter by the bank even after settlement.

This situation not only proves to be financially harmful, but also affects mental stress and future financial planning. Apart from this, your CIBIL score is also deeply affected, making it very difficult to get the next loan or credit card.

In today’s article, we will tell you what to do after being cheated in a Credit Card Settlement. Along with this, we will also know how to avoid such fraud, what things to keep in mind and whom to contact. Apart from this, we will also understand how you can improve your CIBIL score in such a situation and use credit safely in future.

What is a Credit Card Settlement?

Credit Card Settlement is a process in which you negotiate with your creditor to forgive a part of the outstanding amount on your credit card by making a lump sum payment. It is an agreement that you make with your card issuer as a last resort when you see that your credit card debt is increasing.

This can happen due to many reasons, ranging from unnecessary spending to careless spending habits. When your debt increases, the interest on it also increases, which can make it difficult for you to repay the outstanding amount. If you do not see any way out of this, then you can recommend a Credit Card Settlement.

What are the reasons for doing a Credit Card Settlement?

Below are some common reasons:

• If a person loses his job, stops a source of income, or suffers huge losses in business, then it may be difficult to repay the loan on time.

• There may be a shortage of money to repay the loan if the expenses suddenly increase due to a major illness or medical emergency.

• Many times, a person has the burden of more than one loan, which becomes difficult to repay on time.

• There may be problems in repaying the loan due to any natural disaster, accident, or any major crisis in the family.

• If the interest rate of the loan is very high and there is a problem in repaying the installment, then Credit Card Settlement is resorted to.

• Many times, a person is not able to manage his expenses and income properly after taking a loan, which causes problems in repaying.

What documents are required to do a Credit Card Settlement?

If, for some reason, you are not able to pay your credit card in full, then a Credit Card Settlement can be an option. In this, the bank or loan-giving institution (NBFC) settles your outstanding loan for a certain amount by giving a discount. But to complete this process, you have to submit some important documents.

Documents required for Credit Card Settlement:

1. Identity Proof

• Aadhaar Card
• PAN Card
• Passport
• Voter ID
• Driving License

2. Address Proof

• Aadhaar Card
• Electricity or Water Bill
• Bank Passbook or Statement
• Ration Card
• Passport

3. Income Proof

• Salary Slip (last 3-6 months)
• Bank Statement (last 6-12 months)
• Income Tax Return (ITR)
• Form-16

4. Loan Agreement

This is the document issued by the bank or NBFC at the time of giving the loan. It contains the details of the loan terms and your outstanding amount.

5. CIBIL Report

During a Credit Card Settlement, the bank checks your CIBIL score, which gives them information about your credit history. This report shows your credit behavior and current loan status.

6. Settlement Request Letter

If you want to get a Credit Card Settlement done, then you will have to give a written request letter to the bank, in which you will tell about your current financial situation and the need for settlement.

What to do before doing a Credit Card Settlement?

Below are some steps that should be followed before a Credit Card Settlement:

• First of all, check your income, expenses, and all other debts properly. Know how much you can repay.

• Before a Credit Card Settlement, share your problem with the bank or lender. 

• Sometimes, they can offer you a better solution, such as reducing the EMI or increasing the loan term.

• Contact a financial advisor or expert. They can help you make the right decision and explain how Credit Card Settlement will affect your credit score.

• If you decide to do a Credit Card Settlement, read the terms and conditions given by the bank carefully. Make sure that you are not being charged any hidden fees.

• Doing a Credit Card Settlement can reduce your credit score. This can make it difficult to get a loan in the future. Make a decision keeping this in mind.

• Credit Card Settlement should be the last option. Before that, consider other options like refinancing, reducing EMIs, or asking family and friends for help.

How to apply for a Credit Card Settlement?

If you are unable to pay your credit card dues and are troubled by heavy interest rates, Credit Card Settlement can be a possible solution. Under this process, the bank or credit card company can waive off part of your total outstanding amount and give you the option to make a lump sum payment (One-time Settlement). However, this can affect your CIBIL score, so adopt it only as a last option.

Step-by-step process to apply for Credit Card Settlement

• First of all, decide that you are not in a position to pay the entire credit card dues.

• Check your income and expenses and decide how much you can pay at most.

• Talk to the customer care of your bank or credit card company and tell them about your current financial situation.

• Ask for a settlement offer from the bank and start the conversation.

• The bank will propose a settlement amount, which will be lower than your outstanding amount.

• If you don’t accept this amount, negotiate with the bank and attempt to lower the amount based on your capacity to pay.

• After the bank and you reach an agreement on a specific amount, ensure that you receive a written settlement letter.

• It should explicitly state the settlement terms, payment dates, and other conditions.

• After completing the settlement, pay the amount in full within the given time.

• Get a No Due Certificate (NOC) or Final Settlement Letter from the bank after the payment.

• After the settlement, make sure the bank updates the “Settled” status in your CIBIL report.

• This can affect your credit score, so inculcate good financial management habits to improve it in the future.

What is the impact on the CIBIL score after a Credit Card Settlement?

A settlement can hurt your credit score. The impact can be seen in the following ways:

• After the settlement process, your credit report records that you have “settled” your debt. This entry remains in your credit history for 7 years and can be viewed negatively by lenders or other creditors, which can affect your chances of getting a loan in the future.

• Since a settlement means that you have not repaid the entire debt, when you try to get a new loan in the future, banks may reject your application or offer you loans at higher interest rates by looking at your credit score and report.

• After settlement, if you have a credit card or other credit line, your credit limit may be reduced as creditors think you may be a high-risk customer.

• If your credit score drops, it may be difficult for you to get a loan, credit card, or any other type of credit facility. This can also affect your financial stability, especially if you face a financial emergency in the future.

• When you settle with your bank, you are not paying off the entire debt, but a certain amount that is less than the principal amount. This is viewed negatively by the credit bureaus, as it shows that you have been unable to repay your debt. As a result, your credit score may drop.

What is the best time to do a credit card settlement?

Everyone’s needs and time for Credit Card Settlement may be different, but some important points given below can help you –

• If your credit card bill has become very high, and you are managing by paying only the minimum due, then this may be a sign that you should consider settlement.

• If you have lost your job or your sources of income have suddenly ended, and there is no possibility of quick improvement in the future, then taking the option of settlement may prove to be better for you.

• The interest charged on n credit card can usually be up to 30-45% per annum. If you are paying only the interest and the principal is not decreasing, then considering a settlement can prove to be the right option.

• If you already have a home loan, personal loan, or other liabilities and are having difficulty paying the credit card, then settling in time can prove to be beneficial.

• If you are getting repeated recovery calls from the bank and are being threatened with legal action, then this is a sign that you should take some concrete steps soon.

Is Credit Card Settlement Legal?

Yes, Credit Card Settlement is fully legal. As per Indian law, any bank or financial institution can negotiate with its customers and settle the debt.

But here’s a good thing to remember:

When your bank settles your credit card, it gets recorded as “settled”, which negatively affects your credit score. The credit bureaus (CIBIL, Experian, Equifax, etc.) record it in your credit report, which can lead to problems in getting a loan in the future.

So, Credit Card Settlement should be adopted as a last resort only. If you have any other way to pay in full, pursue it.

What are the advantages (Pros) of doing Credit Card Settlement?

Let us know what the benefits of doing a Credit Card Settlement are:

• If your credit card dues have become very high and you are unable to repay them, then settlement can give you great relief.

• When you do not pay your credit card continuously, the bank can send a legal notice to you and can also send a recovery agent.

• The interest on credit cards is very high, which can be up to 30-45% per annum. If you are not paying on time, the interest and late payment fees keep increasing continuously.

• While settlement will bring down your CIBIL score, provided you exercise financial responsibility after settlement and settle your other loans and bills punctually, you will improve your score over a period of time.

• In Credit Card Settlement, you pay a specific sum at one time, which settles your debt entirely. It may be helpful to the persons who desire to come out of debt by increasing a little money at a time.

• Mental tension grows through rising debt and bank calls. On settlement, you are free from this concern, and you may concentrate on a better financial status again.

What are the disadvantages (Cons) of doing a Credit Card Settlement?

Let us know in detail what the disadvantages of doing a Credit Card Settlement are.

• The biggest disadvantage of Credit Card Settlement is that it spoils your CIBIL score. When you settle with the bank and pay a lesser amount instead of paying the entire dues, the bank reports it in “Settled” status. This status can remain in your credit report for up to 7 years, which may make it difficult to get a loan or a new credit card in the future.

• If you have done a Credit Card Settlement once, banks and other financial institutions may consider you a “high-risk customer”. This may cause problems in getting a home loan, personal loan or business loan, or the bank may give you a loan at a higher interest rate.

• If you have settled a credit card with a bank, then the same bank can refuse to issue you a credit card again in the future.

• Doing a credit card settlement can spoil your relationship with the bank. The bank sees it as if you have not fulfilled your financial responsibilities completely, due to which you may face problems in banking services in the future.

• In many cases, the bank can charge you extra charges or settlement fees in the settlement process. Apart from this, if the bank reports the amount waived under the settlement as income, then you may also have to pay tax on it.

What to do if there is fraud in the Credit Card Settlement?

Below are some important steps that you should follow immediately:

1. Collect all documents and evidence

If you have made a settlement through an agent or third party, then collect its receipt, screenshots of conversation, call recordings, bank transaction details, emails etc. as evidence. These will help in strengthening your case in future.

2. Contact the bank immediately

If there is any doubt related to the settlement, immediately contact your bank’s customer care or nearest branch. Tell them through which agent or medium you made the settlement a,nd share complete information.

3. Ask for the status in writing from the bank

Request the bank to tell you in writing whether your credit card account was settled or not. If the settlement has happened, then definitely take its No Dues Certificate (NOC). If not, then your status may be “defaulter,” which will have to be rectified.

4. Complain to the police about the fake agent

If it becomes clear to you that a fake agent or a fraudulent person has cheated you, then file an FIR against them at the nearest police station. You can also complain on the cybercrime portal (www.cybercrime.gov.in).

5. Inform CIBIL or other credit bureaus

If your CIBIL score has dropped or there is an error in the report despite the settlement, you can file a complaint with CIBIL, Experian, CRIF Highmark, or Equifax. They can check whether the information has been updated correctly or not.

6. Complain to the banking ombudsman

If the bank is not taking action on your complaint, then you can file a complaint with the banking ombudsman of the RBI.

Conclusion

Finally, you need to understand that Credit Card Settlement is a serious financial process, which should be adopted with full caution and awareness. When we are going through a financial problem, many times we make decisions in a hurry or under stress, which can lead to huge losses in the future. In the same way, when a person settles after being deceived by a third party or fake agent, he knowingly or unknowingly traps himself in a trap from which it is not easy to get out.

Along with this, it is also important to understand that there is no need to panic after being cheated in a settlement. If you have the right information, then you can compensate for the loss by taking the necessary steps in time. For example, you saw how you can improve your situation by collecting documents, contacting the bank, filing a complaint with the police, and talking to the Ombudsman or Credit Bureau. During this process, you have to work with patience and understanding, because the legal and banking process may take some time.

Moving forward, you will also need to improve your financial habits. Get information from the bank’s official website or customer care before making any settlement or payment. Never give money to an unknown person without verification, even if he is claiming to be an agent, broker, or bank employee. In the future, use your credit card carefully, make payments on time, and if there is any problem, seek a solution directly from the bank.

Frequently Asked Questions (FAQ’s)