Credit information sharing lands banks a new suit

The businessman also wants the court to order that he be compensated for loss of access to the loan facility at Equity, stagnation of his business, and character damage.

CRB-Africa, through Mohamed Madhani Advocates, has denied communicating with Equity or any other bank advising them on Mr Githaiga’s credit worthiness or informing the bank that the businessman had an outstanding loan with CFC Stanbic.  

“If CRB-Africa received any information in relation to Mr Githaiga, it merely did so in the lawful performance of its functions,” CRB-Africa says in papers filed in court. The suit comes in the wake of another by Eddie Gitetu against KCB for passing adverse credit information to CRB-Africa without his knowledge.

Mr Gitetu, who operates a dollar account with KCB, had his name submitted to CRB-Africa in April for inclusion in the list of bad debtors.

The businessman also wants the court to compel the bank to pay him general damages and interest at 30 per cent per annum, saying the bank’s action had embarrassed him and hurt his reputation.

Through his lawyer, Titus Koceyo, Mr Gitetu accuses KCB of falsely informing CRB-Africa that he had not paid $324.85 (Sh27,612) to the bank.

He says he learnt of his predicament when Barclays Bank withheld a Sh500,000 loan he had successfully negotiated on grounds that he had been listed with the bureau as a loan defaulter. Mr Gitetu argues that he had the right to be informed within 30 days of negative information that a bank sends to the bureau.

Barclays Bank, KCB and CRB-Africa are also facing legal action from former MP Ken Nyagudi over alleged inaccurate inclusion in the list of bad debtors. Mr Nyagudi is accusing Barclays and KCB of passing information to CRB-Africa without his knowledge, prompting other banks to deny him credit.

“I am not able to access credit from financial institutions although I have cleared all my obligations with the respondents (KCB and Barclays),” said Mr Nyagudi, the former Kisumu Town West MP.

The two banks and the Central Bank of Kenya are named as respondents in the case that is before the Constitutional and Human Rights judge David Majanja.

CRB has denied Mr Nyagudi’s allegations in an affidavit filed in defence of the suit which Mr Nyagudi filed after Equity Bank, Family Bank and Ecobank denied him credit on the basis of the adverse credit report.

The credit referencing mechanism requires banks and other credit providers to submit information about their clients to a credit reference bureau for sharing with other lenders.

The move is aimed at making credit-worthiness information available to the lenders for use in the pricing of loans and to weed out serial defaulters from the credit market. Banks have so far blacklisted more than 213,000 individuals with the credit reference bureaus, making it difficult for them to access loans for at least seven years.

Financial Services Deepening (FSD Kenya) – a non-profit organisation that monitors the financial services industry – recently published a report indicating that the build-up of consumer information had resulted in the listing of 203,518 individuals and 9,954 businesses as bad debtors by April last year.

Financial analysts say the rapid increase in the number of bad debtors is linked to banks’ decision to share only negative information on borrowers while withholding positive information.