Shylocks profit from fine print, unending charges, heartlessness

When Kahindi* walked into the offices of a credit firm perched in one of the buildings along Moi Avenue in Mombasa, he was desperate. His son required emergency surgery.

He had exhausted all avenues of raising money. His friends had contributed what they could, and he was ineligible for a bank loan, as he was listed with the Central Reference Bureau (CRB) for defaulting on another loan.

“I was desperate. I was given a brochure and taken through it by an agent. She pointed out to me verbally that the loan, as the brochure indicated, would attract interest of four per cent per month,” he explains.

“I think the small font and the length of the form are deliberate. A desperate man or woman has no time to go through it. I just agreed to everything, not knowing the danger in the details,” said Kahindi.

Kahindi later learnt that the credit firm had under one roof all the firms required to carry out approvals of the loan and recovery in case of default.

“I surrendered the logbook and other details needed. I was referred to a car-tracking company, which used the same address as the lender and the auctioneer.”

What Kahindi did not know was that he had signed up for a highly punitive loan.

“I realised later that the Statutory Declaration, the final act in the application form before one gets a loan, was not properly executed by the company. I later learnt that was also deliberate,” he said.

After signing the Statutory Declaration, Kahindi left the office despite the red flags, such as the fact that the form did not contain crucial company details required for the execution of the contract.

“I signed for a loan of Sh105,000 and used my vehicle as security. However, on November 6, 2020, Sh97,471 was wired into my account instead of the agreed amount,” he said.

Thereafter, the lender issued Kahindi with a repayment schedule indicating that the principal sum was Sh127,300, to be repaid in monthly instalments of Sh14,158 for 18 months.

This meant he was to pay a total of Sh254,800. He was told that Sh36,000 was for vehicle-tracking services at a rate of Sh2,000 per month plus an initial fee of Sh5,000.

“I contested the amount. I notified the lender through email, but it declined. I visited the offices, but no one listened to me.

“I went to the Chartered Institute of Arbitrators, but I was not heard,” said Kahindi.

Kahindi’s car was repossessed by the lender’s auctioneer via a notice of proclamation dated December 31, 2020, which indicated it would be seized after seven days.

“I lodged the case with the Competition Authority of Kenya and lost after one and a half years—an inordinately long period considering the court was not busy then,” he said.

Kahindi claims that the then chair of the CAK lamented that creditors were exploiting loopholes in contract and auction laws to fleece clients.

“The court issued a 14-day notice for an inter partes case. This was during the corona period, and mine was the only case listed. The auction proceeded, and the vehicle was sold,” he said.

Another client, Okeyo, lost a truck after using it to secure a loan from a similar microfinance institution in Mombasa to expand his hardware shop in Utange.

Okeyo said a transport firm dismissed him in 2006. He later decided to use his savings and a bank loan to buy a six-wheel truck.

“I thought with the booming housing sector in Utange, I would make good money. In 2008, the truck developed a mechanical problem,” said Okeyo.

A friend advised him to seek a loan from a microfinance institution, as a bank loan would take too long to process.

“The truck was my only reliable source of income. I had to move fast and ensure it was back on the road. So I took a loan from the microfinance,” he said.

Like most clients, the deal was too good to resist. All agencies required to approve the loan were under one roof.

“I received a loan of Sh300,000, the mechanic fixed the truck, and I began servicing the loan. One month I defaulted for just a week, and the auctioneers and police stopped my truck at Kengeleni stage and towed it away,” said Okeyo.

When his driver informed him that the truck had been seized, he cleared the outstanding loan balance of Sh120,000 and went to reclaim it.

“I was shocked when an agent at the microfinance office informed me that charges had accrued because of delayed payment.

“He said I must also pay the firm that towed the truck and the yard where it was parked. In total, the charges were over Sh270,000,” said Okeyo, who reported the matter to the police.

He said police frustrated him for close to three months, during which fines piled up to over Sh700,000. His truck was auctioned.

He said: “I pray to God to forgive all those who conned me. I don’t want to talk much about it because I also went into depression.”