Civil Case No. 295
The Milimani High court, Commercial and Tax division ordered Jamii Bora Bank to pay Vehicle and Equipment Leasing (VAELL) KES 8 million. In the court ruling document seen by Business Today Africa Reporter the court established that Jamii Bora bank had over charged VAELL interest rates of up to 28% which is 14% over and above the 14% as set by CBK under Banking Act of 2016 which caps interest rate charged by financial institutions at 4 per cent above the base rate. According to the new law, banks can be fined up to Sh1 million if they cap loans at more than four per cent above the base rate published by CBK.
VAELL first filed a case against Jamii Bora bank in 2016 following the repossession of its various assets leased to its clients. The banks action emanated from purported arrears of their facility. The court established that the bank had failed to effect the new provision of the amendment of the banking Act with respect to the interest rate. The court established that Jamii Bora Bank had overcharged VAELL by approximately KES 8,040,788.88. The bank had repossessed the lessors assets leased to clients while the arrears were less than this excess interest therefore in the strength of this case, East Africa’s largest leasing firm filed a suit against the bank with at least 17 prayers. In the prayers presented before the Milimani High court judge. The lessor had set out several grounds for seeking review of a ruling dated 31st July, 2017 where the bank misled the court to believe that the rates they charged were as agreed in the agreement and that it was pre-determined, pre-calculated and agreed upon.
These new evidences came after the court had asked the bank to supply the lessor with latter’s statement of accounts showing how much interest rate the former had charged the lessor since 14th September 2014. While reading his ruling, Judge Makau said, “It was after the supply of the statements and subsequent reconciliation that it became apparent to the plaintiff that the bank had misled the court that the interest rates had been pre-calculated and that the bank had been verifying the interest rates and based on that discovery, the Applicant preferred this application review.”
It was ruled that the bank unlawfully attached VAELL’s assets and was ordered to return them. Judge James Makau in his ruling ordered Jamii Bora Bank to comply with section 33B of the Banking Act and apply the lawful rate being 14% interest on all the loan facilities VAELL has with the bank.
In his ruling Judge Makau went ahead to quote the ruling made by the late Hon. Justice Onguto on the same case. He said, “as long as section 33B of the Banking Act is in force and there is in existence a credit facility, a bank ought to be obligated to observe the provisions of law as to statutory rates of interest. It would likely lead to an absurdity to argue that facilities which existed prior to 14th September 2016 may be subjected to any contractual, even usurious, rates notwithstanding the rather express prohibitory provisions of the Act”.
While reading the ruling Judge Makau added, “the defendant (Jamii Bora) could in referring to the Applicant (VAELL), failed to disclose material facts and proceeded to mislead the court on the charging of the interests. The defendant acted contrary to section 33B of the Banking Act. There is also admission that the Defendant’s letter dated 16th February 2018, that they overcharged the interest rates; meaning they all know they acted contrary to the parties’ contractual agreement and deliberately chose not to disclose their position to the court.”
There have been other cases involving banks failing to disclose information to clients and therefore overcharging or subjecting them to abnormal deductions. Most customers are not very keen to know if extra charges have been applied to their accounts. Even those who are keen enough to notice, lack confidence and maybe the capacity to demand the banks to refund them of the illegal deductions.
Joseph Kinuthia, a PSV driver said, “we first took a loan to buy piece of land for the family with a certain bank (name withheld) we were paying the loan without ‘finishing’. We eventually finished paying the loan though I felt that we overpaid unfortunately we were not keeping records of our payments. We took another loan a year later in the same bank. The same scenario repeated itself. We paid it for many months past the months the bank had told us we will pay the loan.”
Kinuthia added, “It reached a point when the loan balance was constant every month irrespective of us paying as advised we decided to forgo and that is when my mother was blacklisted by CRB. Since then I don’t like going to banks to take loans. It is not only us many people complain about banks.” With the recent Jamii Bora bank Vs. VAELL customers can now get refunds if they had been subjected to illegal deduction. For reference you can contact Joseph Kinuthia (0720300140) PSV driver