Laws setting interest rate caps are unconstitutional, the High court has ruled.
In the ruling delivered yesterday, High Court judges Francis Tuiyott, Rachel Ngetich and Jacqueline Kamau ruled that the Central Bank of Kenya (CBK) will continue regulating the rates for 12 months after which the judgement will take effect.
“Mindful of the possible ramifications and disruption on existing contractual relationships between banks and their customers, the court suspended the effect of the declaration for 12 months from the date of this decision to give the National Assembly an opportunity to reconsider the provisions,” the judges ruled.
Of the sections affected most include section 33B (1) and (2) of the Banking Act which were declared vague for trying to cap income for banks from their customers.
Section 33(B) of the Act was declared discriminatory against banks’ CEOs, for providing a punishment in the event they breached the interest rate caps law.
“The provisions of section 33B (1) and (2) of the Banking Act is vague, imprecise, ambiguous and indefinite. And insofar as the contravention of the provisions attracts penal consequences, the same violate Articles 29 and 50 of the Constitution. Article 29 (a) of the Constitution guarantees a person the right not to be deprived of freedom arbitrarily or without just cause,” read the judgement in part.
The petitioner, Mr Boniface Oduor through lawyer Miller Wanjala, said that the parliament overlapped the duties of CBK in determining the maximum interest rates banks should charge on loans.
“The act in its entire form is illegal, null and void. It should not be allowed to continue operating when Members of Parliament violated several laws in the process of enacting it,” said Mr Wanjala.
Customers will now be back to expensive unregulated loans on March 14, 2020 unless an appeal is done.