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Banks faulted for wrongfully blacklisting customers at CRB

By Everlyne Kwamboka | October 1st 2020 at 12:00:00 GMT +0300

NIC Bank Executive Director Alan Dodd (right) and Noel Mabuma, CEO CMC exchange signed a partnership agreement between the companies at CMC Group offices in Nairobi. NIC bank will be financing the acquisition of the CMC's FORD model. [Elvis Ogina.Standard]

Banks have been faulted for wrongfully blacklisting firms and individuals at the Credit Reference Bureau (CRB).

The High Court said transmitting information to the CRB from a system without verification is not only in breach of statutory duty but also the duty of care owed to customers.

“When a bank fails to undertake due diligence to confirm the actual status of its customer’s credit information and thereby provides erroneous information to CRBs, it breaches its duty of care - to the CRB in question and to its customers,” said High Court judge Cicilia Githua.

In her judgment in a case filed by Pekatetwa Investments Company against NIC Bank, Justice Githua said the fact that the bank notified a customer of the erroneous listing and had it corrected does not make it any less culpable as these are actions done after the fact.

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The bank is said to have written to the company directors in June 2013 alleging that its loan account was in arrears for more than 90 days and that it was to be listed as a defaulter.

The letter to the company was copied to CRB Africa Ltd and Metropol Credit Reference Bureau. In the suit against NIC, the firm said Sh119,000 was debited from its account to pay a law firm that was representing the bank in the case. It demanded a cash refund plus interest.

Last September 24, the court ordered the bank to refund the money used to pay the law firm, plus interest at court rates from 2013.

Dispute resolution

And did you know that you have to exhaust CRB’s dispute resolution mechanism before seeking relief from courts? Botto Solar that had sued Diamond Trust Bank was told by the High Court it ought to have sought relief from the CRB.

Judge Mumbua Matheka said in her July 13 ruling that CRB regulations provided a procedure for the resolution of disputes that customers are expected to exhaust before moving to court.

On May 14, the High Court ruled that the decision by Family Bank to list Peter Mwarania in the CRB was in bad faith. He had failed to repay a loan as a result of the termination of his employment, which was declared unlawful. Justice Rachel Ng’etich ordered the bank to compensate him Sh4 million.

Banks High Court CRB regulations
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