The Central Bank of Kenya has warned commercial banks for wrongful blacklisting of customers on the Credit Reference Bureau. CBK further warns that if due process is not followed or the offence listed was not a blacklistable offence, it will sanction the erring financial institution and there will be heavy fines of up to Ksh 1 Million.
“Some institutions have not been submitting accurate and complete data to the bureaus. Certain Banks have been sending threatening messages to list customers for non-credit related matters which is contrary to the law.” Reads a letter sent to the CEOs of commercial banks by CBK’s head of Bank supervision Gerald Nyaoma.
Mr Nyaoma says some banks went ahead to submit negative information to the CRBs about clients without 30 days prior warning or even a notice after blacklisting.
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The CBK says that it has received several complaints that banks were rejecting applications for loans by reasoning the applicants are blacklisted. The CBK says banks should give reasons based on factual information about debtors, and that the Credit information sharing mechanism was a “risk management tool rather than a blacklisting mechanism” as it has helped the lenders recover some loans that had previously been written off.
The credit reference bureaus provide database so the banks can use it to consider the payment conduct of debtors. Banks will be required to forward information relating to actual loan defaults unlike previously where they blacklisted customers holding dormant accounts as they continued to be charged ledger fees resulting in them being in debit position.
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