Lender Guaranty Trust Bank has been slapped with a KES33 million fine for its unconscionable conduct suffered by its client, ASL Limited.

While announcing the penalty, the Competition Authority of Kenya (CAK) further directed the bank to refund the client a total of KES13 million for false representation suffered by the customer.

The dispute landed at the authority's office on October 5, 2024 when ASL Ltd accused the lender of unfair treatment in a case involving the renewal of its existing credit schemes with the bank.

According to disclosures, ASL Ltd was running a number of credit services with GT Bank including working capital support, letters of credit, loans, overdrafts and asset financing agreements since 2001.

However, the bank declined to renew the relationship in 2022 without giving a reason when the service terms of engagement expired.

"In June 2023, GT Bank offered a three-month extension on the facility for the process to be finalized. ASL was required to provide additional security among others demands which it accepted," CAK noted.

"ASL also accepted other revised requirements including reducing one trading line from $5.5 million to $3.5 million and retaining cleared collateral."

In less than a month, however, GT Bank cut ASL Ltd's offer letter by $3 million, a drastic action that forced the company to seek support from rival institution, I&M Bank. 

CAK said it was this switch that invited a rebuttal from GT Bank, slapping ASL Ltd with default notice and charging KES13.2 million in default interest that was backdated to August 2023, when the renewal came into force.

The roiling dispute between the parties saw GT Bank offer to refund KES2.8 million, against a full demand of KES13.2 million.

Upon investigation by the CAK, GT Bank denied accusations of coercion, instead explaining that ASL’s failure to execute the July 2023, a move that triggered contractual default provisions. Further, GT Bank said the default interest was not backdated.

According to CAK, however, GT Bank's partial refund was non-transparent and potentially misleading. 

The authority has directed the lender to refund ASL in full within a month and at the same time train its staff on competition law.

In its finding, CAK cited abuse of unequal bargaining power under section 55 and 57 of the Competition Act. 

"Upon analyzing the evidentiary information, the Authority determined that GT Bank violated Section 55(a)(ii) of the Competition Act on false or misleading representation," CAK stated.

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