Kenyan MPs Push to Stop Banks from Charging Extra Loan Interest

Parliament has been petitioned to amend the Consumer Protection Act, Cap 501, to formally codify the in duplum rule. 

The rule is meant to protect borrowers from paying interest that exceeds the original loan principal.

Speaker Moses Wetang’ula on Tuesday, September 23, informed MPs of a petition filed by Allen Waiaki Kishore, a Senior Counsel with Mwai & Allen Advocates.

The lawyer argued that despite existing provisions under the Banking Act, borrowers continue to face punitive charges.

Section 44A of the Banking Act already stipulates that interest on a loan ceases to accrue once it equals the outstanding principal amount when a loan becomes non-performing.

“The purpose of the rule is to protect borrowers from exploitation, prevent endless accumulation of interest, and encourage fair lending practices,” Mr. Kishore stated in the petition.

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Details of the Petition Presented to Parliament

The petition highlights harassment by debt collectors, unclear judicial interpretations regarding when the rule applies, and disputes over whether penalties constitute interest.

Additionally, Kishore warned that the gaps have eroded public confidence in the financial sector and violated borrowers’ rights under Article 46 of the Constitution.

“The lack of clarity and enforcement undermines public confidence in the financial sector and violates national values under Article 10, especially transparency, accountability, and social justice,” the petition reads.

The petitioner urged Parliament to make amendments that specify when the in duplum rule takes effect, whether it applies to penalties and default charges, and how it is applied in cases of debt restructuring.

Furthermore, he also called for mechanisms to redress past violations, including refunds or settlements for borrowers charged unlawful interest.

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Wetangula Responds to the Petition

Consequently, National Assembly Speaker Moses Wetang’ula confirmed that the matter falls under Parliament’s authority and is not pending before any other judicial or constitutional body and committed the petition to the Public Petitions Committee for review.

Meanwhile, other lawmakers welcomed the petition.

Emuhaya Member of Parliament (MP) Omboko Milemba argued that wider reforms should include unregulated lenders.

From what we see is that the banks, under the other lending institutions, still are very harsh on those who do borrow, and they have actually made it difficult for the local and simple people within the communities to do the borrowing.

He noted that microfinance organizations and digital lenders have worsened the problem beyond the reach of regulation. 

“These are the numerous mushrooming small financing institutions that are also lending money to many Kenyans.”

“As a committee looks at this petition, you should consider roping in these other players who are catapulting the interest beyond what borrowers can achieve,” he added.

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