Why you should inquire in detail about the state of your loan

When you get a loan you walk out of the bank, micro finance or sacco to spend it and trust that they will keep to their contracts and make justifiable deductions for you to settle re-payments at an agreed time.

That is not always the case. Piling complaints at the Competition Authority of Kenya (CAK) shows that if you do not follow the schedule of payments you are likely to be overcharged.

From changing repayment terms, extending deductions past conclusion of repayment period to arbitrary charges, Kenyans have found themselves slapped with hefty charges for simply not being vigilant.

Patience Kwekwe reported Harambee SACCO alleging that she took a loan at an interest rate of 12 per cent which she was to repay in 34 months. She cleared the loan in June 2015.

When in December, 2017, she applied for a fresh loan from the same SACCO she was informed that she still owed the lender a cool Kes 200,000, which—wait for this—was recovered from her SACCO shares without her knowledge.

CAK wrote a Notice of Investigation and after further engagements, Harambee Sacco opted to settle the matter.

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The Sacco was penalized Kes 38,379.85 which is 10 per cent of the principal amount of the loan amounting to Kes 336,000.

Ms Kwekwe’s loan was also re-calculated, the alleged loan arrears cancelled and her shares were restituted.

Another borrower, Geoffrey Wainaina reported Get Bucks Kenya to the CAK after he took a loan only to realize that the loan amount was increasing rather than reducing as he repaid.

Get Bucks quickly wrote to the CAK indicating they had met with the complainant and agreed to resolve the matter amicably.

The lender also opted to settle the matter and were penalized Kes 19,800 representing 10 per cent of the loan amount in question.

Stella Ndung’u complained that her parents took a loan from Faulu Micro-finance in June, 2013, at an interest rate of 12 per cent but the bank adjusted it in 2016 to 16 per cent.

Further, upon their calculation, the actual interest rate was about 30 per cent and not 16 per cent or 12 per cent as purported by Faulu.

On investigation, the CAK established that there was misrepresentation regarding flat rate and reducing balance rate of interest that was presented to Ms Ndung’u.

The anti-trust body went as far as engaging the Central Bank of Kenya to get an expert opinion on the calculation of interest rates.

Like the other lenders above, Faulu Microfinance also opted to settle the matter even after a Sh150,000 fine was slapped on the bank. Other remedies included waiving all penalty interest accruing to the complainant.

John Kiura took a loan in 2013 from Faulu Bank, which he fully settled in April 2018.  However, he was later informed by the bank that he had a pending Kes20,000 balance to clear his account.

He visited the bank and was assured that it was a system error. After sometime, he was informed by the bank that his employer had delayed to repay the amount which had at the time accrued interest and was later listed at the Credit Reference Bureau (CRB).

CAK wrote to Faulu, and Mr Kiura later informed the authority that he was withdrawing the case since the matter was resolved amicably.

It is not just small and unconventional lenders that have had issues calculating interest rates.

William Mungai took a loan from Kenya Commercial Bank in 2011 and he said he finished repaying in October 2017. However, the bank alleged that he still had a loan balance.

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He said that the bank made a total of 75 monthly deductions as opposed to 72 deductions as per the loan agreement.

It was established that the dispute arose due to underpayments, and penalty charges resulting from it and after CAK’s intervention the parties agreed on the amount he was to pay and the duration of the said payment.

KCB also canceled Wilson Nguyo penalties after he complained that 5 per cent charge was unjustified.

He had borrowed Kes 50,000 from KCB M-PESA and repaid a day after the set timeline but was charged a penalty of 5 per cent.

The CAK engaged KCB and the penalty was waived by the bank.

Dennis Gachoka complained about Spire Bank after he secured a loan worth Kes 4.2 million before leaving the bank where he had been servicing the facility without default.

However, Spire Bank had his name listed with a CRB.

The matter was resolved on intervention by CAK as Spire Bank further indicated that his credit status was updated to reflect that he was not a defaulter.

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