In Kenya, borrowers have rights that protect them from unfair treatment by lenders when they default on their loans. The Contract Act, Consumer Protection Act, and Banking Act govern loans in the country, outlining the terms and conditions of loan agreements between lenders and borrowers. These laws ensure that lenders do not stipulate terms that contravene the rights of borrowers. When a borrower defaults on a loan, the lender must follow due process, respecting the borrower's rights.
One of the key rights of loan defaulters in Kenya is the right to receive ample notice from the lender before any action is taken. Digital lenders are required to provide a 30-day notice to the borrower, which must include a reminder to repay the loan at the specified interest rate. The lender must also obtain consent from the borrower before submitting their credit information to a credit reference bureau. If the lender submits the borrower's information to the credit bureau, they must notify the borrower within 30 days.
The right to fair treatment is another crucial right of loan defaulters in Kenya. Lenders are prohibited from using threats, violence, or other criminal means to collect debts owed to them by defaulters. They are also not allowed to use obscene or profane language to collect their debt or make unauthorized or unsolicited calls or messages to a customer's contacts. The law protects borrowers from harassment and ensures that lenders treat them fairly.
Loan defaulters in Kenya also have the right to renegotiate the terms of their loan. Most lenders are willing to renegotiate terms and even restructure the loan to make it more manageable for the borrower. This can include reducing the interest rate on late payments, extending the repayment period, or changing the interest rate. Borrowers should not hesitate to approach their lenders to discuss possible alternatives.
The right to auction property is another important right of loan defaulters in Kenya. When a borrower defaults on a loan, the lender may contact an auction agency to auction the property provided as collateral. However, the Lands Act of 2012 stipulates that the auctioneer must conduct a proper valuation of the assets, and the auction price should be above 75% of the market value. The lender or auctioneer must also give the defaulter the excess amount if the property sells at above-market prices.
In cases where a borrower feels that the lender has imposed unfair penalties or treated them unfairly, they have the right to a fair hearing in a court of law. The court can stop the lender or auctioneer from collecting monies or auctioning the borrower's assets. Borrowers should seek court redress if they feel that their rights have been violated.
Defaulting on a loan can have serious consequences, including auctioning of property, imposition of fees on late payments, and lowering of credit limits. However, understanding their rights can help borrowers navigate the situation and avoid unfair treatment. Judy Ochollah, an Advocate of the High Court of Kenya and financial law expert, emphasizes the importance of borrowers understanding their rights and obligations from the moment they take out a loan.
Key points
- A loan defaulter in Kenya has the right to receive ample notice from the lender before any action is taken.
- Loan defaulters have the right to renegotiate the terms of their loan.
- The right to fair treatment is a crucial right of loan defaulters in Kenya, protecting them from harassment and unfair treatment.
