Court Bars HELB from Charging Interest and Penalties Exceeding Principal Amount

The High Court has barred the Higher Education Loans Board (HELB) from imposing interest, penalties, and fines that exceed the principal amount.

Justice Alfred Mabeya declared HELB’s decision to impose high interest, penalties and fines on non-performing student loans as unconstitutional following a petition filed by three beneficiaries—Ann Mugure, Davis Nguthu and Wangui Wachira.

The three petitioners argued that the interest rates and penalties charged on their loans were exorbitant and contravened their socio-economic rights as enshrined in the Constitution.

“A declaration hereby issues against the respondent (Helb) that by imposing interest amounts and penalties or fines that exceed the principal amount, the respondent is in contravention of Article 43 (1) (e) and (f) and Article 27 of the Constitution of Kenya,” Justice Mabeya ruled as quoted Business Daily.

The three told the court that they borrowed loans from HELB on diverse dates to facilitate their undergraduate studies, but the exorbitant interests and penalties inhibited their ability to repay.

They submitted that on November 19th, 2020 through its Twitter handle, HELB threatened to publish the names and photos of defaulters in national newspapers and issued a 30-day repayment notice.

Mugure, a youth living with a disability, borrowed Sh82,980 in July 2004 at an interest rate of two percent and by July 2016, the debt had accumulated to Sh540,464.

Nguthu was loaned Sh146,090 in July 2016 but the debt had risen to Sh335,207 by March 2021 while Wachira borrowed Sh135,000 in July 2016 which had increased to Sh336,573 by February 2021.

There are a total of 94,216 HELB accounts currently in default, with unpaid loans standing at Sh10.2 billion, according to the latest data from HELB.