Supreme Court set to rule on Kenya bankers' case

The Supreme Court is set to determine if Kenya Bankers Association (KBA) can be sued on behalf of its 43 members.

The highest court in the land yesterday heard from the association and Florence Wanjiru who is seeking compensation for interest rates charged on loans without the National Treasury’s approval on behalf of hundreds of banks clients.

Yesterday, the association told Supreme Court judges Kalpana Rawal, Jackton Ojwang, Njoki Ndung’u, Smoking Wanjala and Phillip Tunoi that the two lower courts - Appellate Court and High Court disregarded plaints by the association that it could not bear legal burdens on behalf its 43 members.

Pandora’s box

KBA, through its lawyer Kenneth Fraser further told the court that the case by Wanjiru, if allowed to sail though, would open a Pandora’s box where 21 million bank account holders would go after banks for compensation leading to collapse of the industry.

“It will be a miscarriage of justice to have 20 million people being refunded back the interest charges they were charged by the banks. The petitioner says money she is seeking is mind boggling, how then can the court give such an order that can cripple the industry?” Fraser posed.

KBA had been sued on behalf of its members with Ms Wanjiru through her lawyer Gichuki Waigwa, seeking compensation for what she termed ‘unlawful bank charges’.

Costs that a borrower may be charged in addition to the interest rate include among others, commitment fees, processing fees, early repayment fees, negotiation fees, valuation fee, insurance, appraisal fee and legal fee.

The case now before the Supreme Court was initially lodged against Standard Chartered Bank in 2003 with Wanjiru seeking Sh38,960 in interest which she claimed was illegally topped on her loan against the Banking Act provisions. Wanjiru told the judges that the issues raised by KBA were never raised in the lower court.

She argued that KBA had conceded that it was the official representative of the banks in the case. “The authority to defend would have been required if say one bank was sued on behalf of the other 42 banks which is not the case here,” the court heard.

Ms Wanjiru held that the financial institutions defied the law by charging higher interest rates without the government’s permission.

The judges will either break or make the class action suit. If the case goes through, KBA will then have killed Wanjiru’s case on technical basis and if it is dismissed it means bank managers will be clutching on their calculators wondering how  much money will move out of their vaults. The judges will notify the parties on when they will issue their ruling