Kenyan Banks, Saccos Receive Nod to Blacklist Guarantors for Defaulted Loans

The High Court has given a nod to banks, Saccos and other lenders to blacklist guarantors with Credit Reference Bureaus (CRB) in case of defaulted loans.

The court has allowed financial institutions to blacklist guarantors if principal borrowers fail to repay in a case where a Kenyan, Obadiah Gitonga, sued Cooperative Bank of Kenya (CBK) for blacklisting him over a bad loan where he was the guarantor.

“The referral of any information to the CRB is a requirement of the law and the defendant as a financial institution is entitled to do the same, and as a result of their negligence in notifying the plaintiff of the outstanding balance, the court has held that the plaintiff will not pay any interest on the said sum,” ruled Lady Justice Grace Nzioka.

Gitonga was seeking to have his name removed from CRB, a request the court declined, noting that Cooperative bank acted within the precincts of the law in blacklisting him.

“In the given circumstances, I find no basis for granting the orders sought,” ruled the court.

Justice Nzioka ruled that a guarantor assumes the responsibility of settling the debt where the principal debtor fails.

Gitonga accused Co-op Bank of maliciously listing him with the CRB and causing him huge losses after lenders rejected his applications for loan on grounds of his negative credit record.