School director sues Co-op Bank for credit blacklist

Politics and policy 

The Co-operative Bank headquarters in Nairobi. Photo/FILE 

By Galgalo Fayo, gfayo@ke.nationmedia.com

In Summary

• School director seeks Sh238 million and review of credit report and release of charged title.
• He says Co-op Bank blacklisted him with the Credit Reference Bureau for alleged default on a facility for which he was a guarantor, blocking his access to credit for seven years.
• The suit raises pertinent questions on the liability of guarantors in the event of default.

A businessman has moved to court seeking Sh215.8 million compensation from Co-op Bank after the lender allegedly blacklisted him over a loan default without his knowledge

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In a suit filed at Milimani High Court, Obadhia Gitonga Micheu says Co-op Bank blacklisted him with the Credit Reference Bureau (CRB) for alleged default on a facility for which he was a guarantor, blocking his access to credit for seven years.

The suit raises pertinent questions on the liability of guarantors in the event of default. Kenyans routinely guarantee loans for each other, and sometimes clear arrears or have their assets attached after the borrowers default.

“The plaintiff avers that the listing is illegal, unlawful and malicious as he has never received any adverse notice from the defendant as required under the provisions of regulation 28 of Legal notice No 97, the Banking (Credit Reference Bureau) regulations, 2008 of Banking Act Cap 488,” says Mr Micheu in documents filed in court on Wednesday.

Mr Micheu argues that blacklisting him when he was just a guarantor infringed on his rights because he had not applied for any loan from Co-op Bank.

He says he guaranteed Chogoria Junior School, where he was a director, for the loan from Co-op Bank. He claims the bank later recovered the money by selling off the school land by private treaty.

He says he discovered that he has been blacklisted with the CRB by Co-op Bank, when he applied to KCB for a loan to upgrade his Chogoria College.

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The application was rejected causing him loss of millions of shillings in earnings.

“Listing the plaintiff to the Credit Reference Bureau yet he was merely a guarantor and had not applied for any loan from the defendant (is malicious and defamatory),” he adds.

Co-op Bank head of marketing and public relations Ngumo Kahiga told Business Daily on the phone that the company had not been served with the court papers.

The businessman wants Co-op Bank to pay him Sh215.8 million, being the estimated loss he incurred after other banks rejected his loan application for expansion of business because of the blacklisting.

Mr Micheu’s claim comes a year after a former MP lost a case in which he accused the CRB of inaccurate listing of his financial transaction details.

Mr Kennedy Odhiambo Nyagudi, the former Kisumu Town West MP, claimed that Barclays Bank of Kenya and KCB gave the information to the CRB without his knowledge, prompting other banks to deny him credit.

Following the adverse credit report, Mr Nyagudi said he had been denied credit by Equity Bank, Family Bank and Ecobank.