The Law Society of Kenya (LSK) through a petition to the National assembly, now wants all credit providers, including mobile loan providers placed under the in duplum rule, a move that will greatly reduce interest rates charged by the providers.
“These provisions shall, for avoidance of doubt, apply equally to mortgage service providers and mobile lending,” says the petition to Parliament.
The in duplum rule provides that arrear interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time (and not the amount of capital originally advanced).
According to The Business Daily, LSK petition to parliament requests that the change should be done through the Consumer Protection Act that will be applicable to all credit providers across the board.
LSK says that the Consumer Protection Act does not completely protect consumers in regards to interest charged irrespective of consumer protection article as per the Constitution of Kenya.
Acts of Parliament such as the Microfinance Act 2006 and Housing Act Cap 117 do not sufficiently protect the consumer from many mobile money lenders in the industry.
“Money Lenders Act was repealed in 1984 and has not been replaced to regulate individuals, who provide credit service in addition it has not been replaced with any other act to regulate individuals who provide credit services in view of providing equity and equality for all Kenyans citizen as the provided by law.” says LSK President Allen Gichuhi
In the proposed changes to the Consumer Protection Act says that, “In all credit agreements, interest shall automatically stop to run when it equals the unpaid principal, and where the accrued interest or a part thereof is paid, it shall start to run again but only until it is again as high as the unpaid principal.”
Gichuhi notes that Kenyans are suffering at the hands of unscrupulous lenders and shy-locks who are charging high monthly interest rates at 5 per cent with no protection for innocent borrowers.
