Petition in Parliament Seeks Ban on Interest and Penalties Beyond Original Loan Amount
A new petition has been laid in the National Assembly seeking to bar banks and lending institutions from charging borrowers interest and penalties beyond the original loan amount.
The petition by senior counsel Allen Waiaki Kishore of Mwai & Allen Advocates wants the Consumer Protection Act to be amended to strengthen the “in duplum” rule which limits accumulated interest to the principal borrowed.
Speaker Moses Wetang’ula who presented the petition to the House said although section 44A of the Banking Act provides that interest on non-performing loans stops once it equals the outstanding principal, many borrowers are still being charged hidden charges and exploitative lending practices.
“The petitioner says the rule is to protect borrowers from exploitation, prevent endless accumulation of interest and promote fair lending,” Wetang’ula told MPs on Tuesday.
The petition highlights how banks, microfinance institutions and digital lenders are still imposing penalties, default charges and additional fees even after interest has reached the principal amount. It also notes that borrowers are being harassed by debt collectors and are suffering from inconsistent judicial interpretations of when the in duplum rule applies especially in cases of loan restructuring.
According to the petitioner this lack of clarity erodes public trust in the financial sector and violates constitutional rights under Article 46 which guarantees consumer protection. It also raises concerns on national values of transparency, accountability and social justice as provided for in Article 10.
To address these gaps the petition wants Parliament to amend the law to clearly define when the rule applies, whether it covers penalties and charges in addition to interest and provide a uniform framework for loan recovery and restructuring. It also proposes mechanisms to compensate borrowers who have already been charged unlawful charges including refunds and settlements.
Speaker Wetang’ula confirmed the matter falls within the House’s mandate and has been referred to the Public Petitions Committee for further review under Standing Orders.
Backing the petition Emuhaya MP Omboko Milemba said there is need for wider reforms in the financial sector.
“From what we see banks and other lending institutions are still very harsh on borrowers, it’s difficult for ordinary people in the communities to access credit,” he said.
Milemba also raised concern on the rise of unregulated microfinance outfits and digital lenders that are operating without oversight exposing many Kenyans to predatory lending practices.
The Public Petitions Committee will now look into the matter before presenting its report to the House.
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Petition in Parliament Seeks Ban on Interest and Penalties Beyond Original Loan Amount