A court has directed Jamii Bora Bank to comply with banking
guidelines in calculating interest of a loan it advanced to a regional
vehicle leasing company in May 2015.
Justice Onesmus
Makau ordered the lender, which loaned Sh600 million to Vehicle and
Equipment Leasing Limited (Vaell), to come up with the right figure that
is based on Banking Act.
The tier-3 lender admitted
that it had overcharged Vaell the interest rate by Sh8 million and acted
contrary to their contractual agreement.
“Should the court shut its eyes on such a matter and let the
bank continue benefiting from a ruling that was obtained through
misleading the court and unjustly?” the judge asked.
He
ruled that “as long as Section 33B of the Banking Act is in force and
there is in existence a credit facility, a bank is obligated to observe
the provisions of the law as to statutory rates of interest.”
In
directing the bank to follow the law, the judge noted that the lender
had concealed material facts and misled the court to believe the
interest rate charged was pre-determined and pre-charged.
The
court had earlier directed the firm to repay the loan but it filed a
fresh application for review of those orders, saying the bank did not
furnish it with a full statement of its account regarding the interest
charged and the amount owing.
When the company was
supplied with the statement, it then discovered that the interest rate
charged was above the banking rule cap.
The led to Justice Makau to order the bank to calculate fresh interest of the amounts owed as per Section 33B.
In
his ruling after hearing both parties, the judge said Vaell discovered
after reading its statement that the “bank was charging interest at its
sole discretion and that it was also charging interest on the facilities
at different discretionary rates, some as high as 28 per cent.”
It
emerged that the bank had slapped Vaell an interest of 25 per cent
against the Central Bank of Kenya’s 14 per cent interest cap.
The
company, through lawyer Stella Muraguri, had prayed that the bank be
compelled to return motor vehicles it had taken away in the exercise of
statutory powers to recover its monies after a default on loan
repayment.
Vaell said it defaulted on repayment due to
different charges on interest rate thus compelling it to move to court
to fight for its rights.
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