Reprieve For Loan Guarantors As Bill Protecting Them Gets Nod

The National Assembly’s Justice and Legal Affairs approved a bill that will compel creditors to seize assets of defaulting borrowers before going for guarantors’ properties.

However, the law will only apply to cases that take place after the Bill becomes law, while the status quo shall remain for current cases.

“Upon hearing from the legislative proposal’s sponsor (Mr Waititu), the committee was persuaded by the proposed amendment and recommends for the passage of the Bill subject to one minor amendment,” Baringo North MP Mr William Cheptumo said.

The Bill (Law of Contract (Amendment) Bill, 2019) sponsored by Juja MP Francis Waititu seeks to protect guarantors whose properties when the primary borrowers default their loans.

In October last year, in a related case, the high court allowed banks and other financial service providers to blacklist guarantors with Credit Reference Bureaus (CRB) in case of bad loans.

The ruling was made in a case where one Obadiah Gitonga had sued Cooperative Bank for blacklisting him over a defaulted loan where he was the guarantor.

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“The referral of any information to the CRB is a requirement of the law and the defendant as a financial institution is entitled to do the same, and as a result of their negligence in notifying the plaintiff of the outstanding balance, the court has held that the plaintiff will not pay any interest on the said sum,” ruled Lady Justice Grace Nzioka.

Mr Gitonga wanted to be delisted from CRB, a request the court denied saying that the bank acted within the precincts of the law.