Inside petition seeking to shield Kenyans from predatory lenders

The National Assembly has been petitioned to amend the Consumer Protection Act, Cap 501, to protect Kenyan borrowers from paying interest charges that exceed the original loan amount, a safeguard known as the in duplum rule. A petition lodged by Allen Gichuhi, a Senior Partner at Wamae & Allen Advocates came to parliament through Speaker of the National Assembly, Moses Wetang'ula, on Tuesday, September 23. According to the petition, commercial banks, microfinance institutions, and digital lenders frequently demand payments far above the principal loan through a combination of interest, penalties, and hidden charges. Borrowers are often exposed to harassment from debt collectors and inconsistent judicial rulings. Gichuhi argued that while Section 44A of the Banking Act already outlines the in duplum rule which stipulates that "interest on a loan ceases to accrue once it equals the outstanding principal amount when a loan becomes non-performing," many lenders continue to exploit loopholes to charge excessive penalties, default fees, and interest. "The purpose of the rule is to protect borrowers from exploitation, prevent endless accumulation of interest, and encourage fair lending practices," the Speaker said when relaying the petition to MPs. If adopted, the proposed amendments would codify the in duplum rule within the Consumer Protection Act, providing uniform safeguards for borrowers across all financial platforms. The move would also strengthen oversight of non-bank lenders and help restore public confidence in the credit market. In some cases, disputes have arisen over whether penalties and default charges count as "interest," leaving consumers vulnerable to ballooning debts. Mr Gichuhi noted that this lack of clarity undermines Article 46 of the Constitution, which guarantees consumer rights, as well as Article 10, which enshrines transparency, accountability, and social justice. The petition, therefore, calls on Parliament to clarify when the rule takes effect, specify whether it applies to penalties, default charges, and other ancillary costs. Other demands include creating uniform mechanisms for loan restructuring and recovery and provide redress mechanisms such as refunds or settlements for borrowers subjected to unlawful charges. "The lack of clarity and enforcement undermines public confidence in the financial sector," the petition reads. Speaker Wetang'ula confirmed that the matter falls squarely within Parliament's jurisdiction and is not before any court or tribunal. He committed the petition to the Public Petitions Committee for consideration in accordance with Standing Orders. Emuhaya MP Omboko Milemba argued that broader reforms should be put in place to rein in exploitative lenders. "From what we see, the banks and other lending institutions are still very harsh on borrowers, and they have made it difficult for ordinary Kenyans to access affordable credit," Milemba said. He added that unregulated players in the financial market worsen the problem. "There are many mushrooming small financing institutions and digital lenders that are not properly checked by law. They catapult the interest beyond what borrowers can actually pay. The committee should look into regulating these institutions as well." Kenya's financial sector has seen a rapid growth of mobile loan apps and microfinance firms, many of which operate outside the strict regulatory frameworks governing banks. Critics say these lenders target low-income borrowers with easy credit, but their repayment terms often trap families in a cycle of debt.

Inside petition seeking to shield Kenyans from predatory lenders

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