Guaranty Trust Bank Kenya Limited has been ordered to pay a total of Ksh 46.39 million for unfair and oppressive business practice in a ruling made by the Competition Authority of Kenya (CAK).
According to the competition regulator, the lender has been penalised Ksh 33,180,000 for engaging in false and misleading representations and unconscionable conduct against its customer, ASL Limited, involving a credit facility.
“Unconscionable conduct refers to business practices that are unfair and oppressive, particularly where businesses take advantage of consumers’ vulnerability, lack of knowledge, or unequal bargaining position. This may occur where a business coerces a consumer into entering contracts they do not fully understand, withholds crucial information, or utilizes threats, or ambiguous wording to influence their choice,” said CAK.
Investigations by CAK reveal that, in July 2021, ASL secured credit facilities including overdrafts, letters of credit, guarantees, asset financing, and working capital support which were secured against the company’s assets and personal guarantees by the directors of ASL.
While the facilities were scheduled to expire in May 2022, subject to review and renewal. ASL which is a diversified Kenyan company involved in manufacturing, distribution, trading, and industrial products, submitted a formal request in January 2022 for renewal of the facilities as per the agreement.
However, GT Bank in June 2023, offered a three-month extension on the facility and reduced one trading line from $5.5 million to $3.5 million and retaining a cleared collateral. The bank later reduced the limits by $3 million which ASL rejected.
The commercial lender then went ahead to send ASL a formal default notice and was charged the firm Ksh 13.2 million in default interest, allegedly backdated to August 2023, when the renewal process had commenced.
Investigations by the CAK found out that GT Bank offered to refund ASL Ksh 2.8 million, against the disputed amount of Ksh 13.2 million which ASL rejected the amount and sought full refund, arguing that the default interest was unfairly and improperly applied.
CAK findings show that the bank errorerd in continuing to charge fees for unapproved facilities, misleading ASL about the availability and approval status of the services and applying default interest retroactively without prior notice, thereby misrepresenting ASL’s account status.
“Additionally, the Authority has ordered GT Bank Kenya Limited (GT Bank) to refund ASL Limited (ASL) KES 13,211,285, being the summation of the fees and charges determined as improperly levied,” the regulator noted.
CAK said aggravating factors, which increase the penalty, include; impact, coverage and duration of contravention, repeat offender, non-cooperation, conduct ongoing during investigation, impact on SMEs or retaliation against complainants.
