Banks are free to share your credit information, rules court

 The High Court has dismissed a case challenging the law allowing banks to share customers’ loan payment information.

Justice Isaac Lenaola in his ruling stated that the Banking (Credit Reference Bureau) Regulations, 2013 are reasonable and are within the law.

A businesswoman, Georgina Khaemba filed the case in 2014, claiming that the regulations as set were unrealistic to those who had not serviced their loans on time and were locking out customers from their right to access loans from a bank of their choice. But the judge ruled that there was no basis on which he could declare the rules “unconstitutional or discriminative”.

“Whereas every individual may be in need of a loan, it must be remembered that not everybody may meet the criteria for qualification of being granted such loans as they may wish. In this regard, when an individual’s credit history does not favour him or her in terms of getting a loan, or when such an individual’s financial status is not favourable to convince the money-lending institution of his or her ability to repay a loan, it cannot be said that he or she is being discriminated against,”  the judge ruled. Ms Khaemba in her case also lamented that the regulations were not only threatening the financial systems and the economy, but also are a potential source of failure for the lenders to mitigate debt default.

She also told the court giving out information on an individual was infringing on their right to privacy. But Treasury Permanent Secretary Kamau Thugge, in response, told the court that credit information sharing was importan following a high level of non-performing loans.

Thugge said that the only solution to the problem was to pass information on serial defaulters who would borrow from multiple banks with ease due to lack of a mechanism to curb such behaviour. Justice Lenaola agreed with the PS and ruled that: “To expect that a serial defaulter should walk in and obtain a loan without due diligence of past repayment records is mischievous, to say the least.”

The judge ruled that the regulations were realistic, adding that the court could not interfere with the Central Bank’s regulated process.  He said that the rules were to streamline debtors.

“Although the petitioner has alleged that the threat of violation is obvious, I see no facts or even hypothesis to support such a contention. The Regulations are reasonable, are applied to all loan applicants and are intended to create discipline among loanees,” he ruled.