NAIROBI, Kenya, June 16 – Borrowers could soon receive stronger protection from excessive loan charges after a parliamentary committee recommended extending the in duplum rule to all lenders, including digital lenders, microfinance institutions, Saccos and informal credit providers.
A report by the National Assembly’s Public Petitions Committee has proposed amendments to the Consumer Protection Act, Cap. 501, to entrench the rule, which limits the amount of interest that can accrue on a loan once it equals the outstanding principal amount.
If adopted, lenders would be barred from continuing to charge interest once the accumulated interest reaches the amount originally borrowed.
“On the prayer that the National Assembly considers amending the Consumer Protection Act, Cap. 501 to provide for when the in duplum rule takes effect; whether it applies to penalties, default charges, and other costs in addition to interest; uniform mechanisms for debt restructuring and recovery in compliance with the rule; redress mechanisms for borrowers who have been subjected to unlawful interest charges, including refunds or setoffs; and any other mechanisms that will secure borrowers from exploitation, enhance consumer protection, and uphold the Constitution; the Committee recommends that the Consumer Protection Act, Cap. 501, be amended to entrench the In Duplum Rule,” Committee Chairperson Muchangi Karemba said.
“The Committee thus recommends that this report be debated by the House as per Standing Order 208A(c), and in line with Standing Order 114A(b),” he added.
Currently, the in duplum rule applies mainly to institutions regulated under the Banking Act, leaving borrowers who obtain credit from digital lenders, microfinance firms, Saccos and informal lenders with limited protection against excessive interest charges.
According to the committee, the absence of a uniform legal framework has led to inconsistent court interpretations on how and when the rule should apply, particularly in cases involving loan restructuring, penalties and default charges.
“The inconsistent judicial interpretations on the scope and timing of application of the rule, whether before or after restructuring a loan, or whether penalties count as interest, further lead to harassment of borrowers by debt collectors even after repayment obligations have exceeded the statutory threshold,” Karemba said.
“The lack of clarity and enforcement undermines public confidence in the financial sector and violates national values under Article 10, especially transparency, accountability and social justice.”
The proposed reforms come amid growing complaints from borrowers over high interest rates charged by some digital lenders and microfinance institutions, with some loans attracting charges that exceed the original principal amount.
Consumer groups have also raised concerns over aggressive debt recovery practices that have led to the seizure of assets such as motorcycles, vehicles and houses after borrowers defaulted on loans.
