News Column

Banks Eye Mediation to Settle Loan Cases

July 11, 2014

Lola Okulo

Bankers have established a media- tion centre to help reduce the number of court cases and save time and money spent on settling disputes.

Barclays, Equity, Family, Gulf and Housing Finance are the first lenders to sign up in the pilot project of the mediation centre. The centre will be housed at Strathmore Law School and the pilot phase will run for six months before more banks are brought in.

"We are pleased to participate in this pilot programme because financial services can be complicated and sen- sitive; therefore, both customers and banks need to first employ various options in an effort to reach an amicable agreement whenever disputes arise," said managing director of Housing Finance Frank Ireri.

"Certainly, there are cases which would go to court, but the goal is to minimise costs on both sides and maintain relationships," he said.

Last month, the High Court allowed past borrowers to join a class suit challenging the legality of interest rates charged by banks since the enactment of the Banking Act of November 1989.

A school director has also recently sued Cooperative Bank for having him blacklisted by a credit reference guaranteed.

In 2009, Kenya Commercial Bank was ordered to pay Judge Nicholas Ombija Sh2.5 million for defamation, after a faulty Visa card caused him embarrassment by compelling him to re- turn items taken, when he tried to pay for goods purchased at a supermarket.

KBA noted that time wasted in settling disputes in court is never recovered by the industry and also contributes to deterioration of loan portfolios, adding that the expenses incurred tend to benefit other parties, including legal firms and auctioneers.

KBA chief executive Habil Olaka said the mediation process would not infringe on the consumers' consti- tutional right to take legal action in court. However, he said, the fact that it typically takes five years for banking- related cases to be resolved in court, and legal fees can be as high as Sh500,000 to Sh1 million, both customers and banks would see the value of the complimentary service that is being provided at the banking industry mediation centre.

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Source: AllAfrica

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