Banking law amended in 2007

The banking amendment act (2006) and finance act (2006) were gazetted in January 2007. Some changes that will affect the banking system in a busy year, in addition to possible merger activity, include;

- Ban on bank charges within savings accounts. In fact banks must pay interest as long as the account minimums are maintained
- Section 44A (in duplum rule) – banks can only recover principal amount lent, interest to an amount not exceeding principal, and recovery expenses from bad debts. (Fortunately for banks this will not be applied retroactively)
- CBK gets a deputy governor appointed by the president
- CBK also gets to vet the professional and moral suitability of owners (of more than 5%), directors, and senior managers of banks
- All banks must get permission from the finance minister to open branches or establish subsidiaries outside Kenya
- Banks are allowed to invest in real estate. They can also hold land for as long as it takes to realize/recover debt
- Allows sharing of non performing assets information with the Central bank, others banks and credit reference bureaus

Class action suit against HFCK

Civil suit no. 151 of 2003 to be heard at Milimani commercial courts of February 25, 2005 pits four (4) mortgage borrowers against the Housing Finance Company of Kenya (HFCK) and seeks to challenge “default charges,” ”penalty interest, ”interest on arrears,” and other charges that HFCK has debited against these borrowers account. Through an initiative spearheaded by the Interest Rates Advisory Centre (associated with former MP Joe Donde), 60 other borrowers have been enjoined in the class action suit against HFCK. IRAC is also seeking to register other borrowers by February 20th to participate in the suit against HFCK.