CBK orders banks not to blacklist dormant account holders

Banks should not blacklist customers whose dormant accounts run into negative balances, the Central Bank of Kenya (CBK) has said.

“Failure to close a bank account does not in itself amount to defaulting on a loan. However, it is important to note that credit facilities that had not been fully serviced or regularised when they became dormant may amount to non-performing loans,” said CBK in response to questions by Business Daily regarding the matter.

Customers have accused banks of blacklisting dormant account holders whose balances slip into negative figures due to standing monthly charges.

The lenders then deny the account holders access to credit, effectively lumping them in the category of loan defaulters.

CBK has asked banks to adhere to conditions stipulated in the Credit Reference Bureau (CBR) regulations.

Take advantage

Bank customers should take advantage of the free credit report copy that they are entitled to each year to check any inaccuracy, CBK said.

Credit reference regulations allow customers to raise complaints in not more than 100 words on inaccuracies in the report.

The Kenya Bankers Association (KBA) intends to set up an office of an ombudsman to arbitrate conflicts between banks and customers.

Sharing of borrowers’ loan repayment history started in July last year with the aim of cutting out serial defaulters.

The system is expected to develop to levels where information on dormant accounts will be relevant but not necessitating black-listing.
“As Kenya moves towards comprehensive credit information sharing, the financial profile of customers will become more pertinent.

In comprehensive credit information sharing systems, information on account operations such as dormancy is a consideration,” said the CBK.

The credit bureau system has specialised in gathering information on loan defaults, limiting wider public benefits that could accrue from the body and undermining some reasons for setting it up.

One of the reasons for creation of the body was to allow clean borrowers to access cheaper loans under less stringent terms.
KBA said it was working on modalities to encourage sharing of data on performing loans by next June.

Bank customers have also been asked to update their personal data so that letters on their being black-listed reach them.