Man in court to stop banks from unilaterally raising loan interest rates and charges

A petition was filed on Monday at the High Court in Nairobi seeking to stop commercial banks from unilaterally increasing interest rates, default charges, and other loan-related fees.

The case filed by Francis Awino sought conservatory orders against the Central Bank of Kenya, the Attorney General and the Kenya Bankers Association on behalf of licensed commercial banks.

In court papers, Awino argued that banks have been relying on contractual clauses to impose upward variations in lending rates, penalty charges, and loan repricing without demonstrating compliance with Section 44 of the Banking Act and constitutional requirements of fairness, transparency, and legality.

He wanted the court to temporarily restrain banks, pending the hearing and determination of the petition, from enforcing any upward interest-rate variations, default charges, risk-based pricing increases or similar lending charges based solely on unilateral contractual provisions.

Awino further argued that banks should not be allowed to rely on contractual clauses to bypass statutory and constitutional consumer protection safeguards relating to lending rates and loan repricing.

He sought orders compelling the Central Bank of Kenya and the Kenya Bankers Association to place before the court and publish a detailed breakdown of lending practices between 2024 and 2026, including effective lending rates, repricing clauses, default charges, penalty fees, collateral realization data and internal or regulatory frameworks used to vary customer loan pricing.

The petitioner also asked the court to compel disclosure of data on the extent of commercial banks’ investments in government securities compared to lending to the private sector, together with policies and supervisory frameworks guiding that allocation.

Awino argued that the current lending model is opaque, unreasonable and procedurally unfair, contrary to Article 47 of the Constitution and the Fair Administrative Action Act.

According to the petition, unilateral interest-rate variation and hidden repricing mechanisms threaten consumer rights under Article 46 and socio-economic rights protected under Articles 40 and 43 of the Constitution.

He further contended that Section 44 of the Banking Act cannot be overridden through standard form contracts between banks and customers.

The petitioner said continued enforcement of the contested lending practices exposes borrowers, mortgage holders, depositors and small businesses to ongoing constitutional harm, and wants the court to stop banks from listing, penalising, auctioning or repossessing borrowers over disputed interest-rate increases unless with leave of the court.