The Kenya commercial Bank (KCB) has lowered credit limits to zero for its customers listed with Credit Reference Bureaus (CRBs).
This comes a day after the government announced fines for banks and financial institutions that deny their customers loans based on CRB listing.
Speaking to Kahawa Tungu, some of the customers affected by the lender’s move said their loan limits had been maintained for over a year, and were pulled down immediately the government announced the fines.
“Now to evade this, KCB has deactivated all the loan limits that they had allocated to their customers who are listed with the CRB. For example a client whom they use to notify that she qualify for a loan of Ksh54,000 now has zero limit,” lamented the customer.
Other banks and lending institutions are said to have followed suit and pulled down to zero the loan limits of their blacklisted customers.
In new regulations announced this week by the National Treasury, banks, saccos and micro finance lenders will now face a fine of Ksh2 Million for every defaulter who is denied loans on account of being listed with the CRBs.
“An institution that denies a customer a credit facility or any other financial service solely on the basis of a credit score shall be liable to a monetary penalty of 2 million shillings or such other sanctions under the Act, the Microfinance Act, 2006, or the Sacco Societies Act, 2008, as the Central Bank may impose,” says Treasury Secretary Ukur Yatani in the new CRB regulations.
Lenders can only reject a loan application due to other reasons and not their Credit score earned from the CRB listing. The institutions must inform the borrowers in writing about the reasons for rejection of their loan applications.
The introduction of penalties to the lenders is in line with the government’s expectations of the financial institutions to boost cash flow of companies and workers who have been worst hit during the Coronavirus pandemic. The virus has resulted in salary reductions, massive lay-offs and low demand for products in the market leaving families and companies straining to keep afloat.