MP Moves to Protect Loan Guarantors from Lenders in New Bill

A Member of Parliament has moved to make amendments to the existing law to stop lending institutions from going for guarantor's property in case principal borrowers default on loans.

In his proposal, Juja MP Francis Waititu wants banks and other lenders be forced to pursue principal borrowers in case they fail to repay the loans before they resort to recover their cash from guarantors.

The MP says the move aims at protecting the property of guarantors when a borrower defaults on a loan. Under the current law, creditors are free to pursue either of the parties in a bid to re-cover the money.

The proposal is contained in an amendment to Contract Law sent to National Assembly Speaker Justin Muturi by the Jubilee MP. Cases of lenders auctioning the property of guarantors and letting the principal borrowers go scot-free have been on the rise in recent years.

Waititu says the Bill aims at “providing a hierarchy that shall be followed by creditors when recovering debt”.

If passed, financial institutions will be required to first exhaust all securities provided by the loanee before pursuing securities given by the guarantors.

Waititu seeks to have Section 3 of the Law of Contract amended to state that “the plaintiff shall first realise the security of the principal.” He adds that the aim of his Bill is “to protect the guarantor from exploitation by creditors.”