Introduction

While the economic downturn globally has seen a rise in loan defaults, there has been a rise in cases where individuals claim they have not defaulted on loan payments but are nonetheless adversely listed with credit reference bureaus (CRBs).

Banks, microfinance banks and other credit providers have a legal obligation to forward to the CRBs names of customers who default on loans, and the CRBs have a corresponding duty to receive such information. This sharing and exchange of both positive and negative information on the performance of the credit facilities extended to customers is done within a defined legal framework.

In this write up, we explore issues surrounding improper listing of persons by the CRBs.

Can you dispute the information held by CRB?

Regulation 29(2)(c) of the Banking (Credit Reference Bureau) Regulations of 2020 (the CRB Regulations) grants customers the right to dispute any information held about them by the Bureau. This includes the customer’s right to formally notify the Bureau in writing regarding any errors or inaccuracies concerning the information within the Bureau’s database. Furthermore, Regulation 29(2)(f) of the same CRB Regulations permits customers to forward such disputes to the alternative dispute resolution mechanisms, a court of law, or to the Central Bank if they feel aggrieved.

Can the actions of a bank in causing a wrongful negative listing of a customer amount to defamation?

 Firstly, Regulation 26 provides that banks and microfinance banking institutions must issue a customer with 30 days’ notice before submitting any negative information to a CRB. If any such information is incorrect, it must be updated or corrected within 5 days. And after the information is furnished a bank or microfinance institution must confirm this position to a customer.

A defamatory statement refers to a written or oral statement made with the intention of harming the reputation of a person or their business by exposing them to hatred, ridicule, or contempt. A defamation claim has to be brought within 12 months of the wrongful CRB listing.

However from the emerging case law, it may not be prudent to mount a defamation claim against a bank or lender as a bank is not usually actuated by malice in submitting information to a CRB. Further a CRB is mandated to protect confidentiality of the information it receives about any customer, and only to release this information pursuant to the Regulations.

Can causing the wrongful negative listing of a customer amount to negligence and breach of a statutory duty of care on the bank and the bureau?

A claim of negligence must be brought within 3 years. The Bank-customer relationship is contractual in nature and imposes a duty of care on a bank or lender, to exercise reasonable care and skill in its dealings with the customer.This duty extends to the requirement that the bank comply with its duties to a customer under the CRB Regulations.

A CRB, on the other hand, is obliged to under the CRB Regulations to ensure that the customer information is received from a reliable and credible source which takes responsibility for accuracy, completeness, and timelines of the information. The CRB Regulations mandate a CRB to verify the accuracy of the customer credit information that it receives. Failure to comply may result in liability for a breach of duty, with potential penalties not exceeding KES 500,000/=, as well as any additional administrative sanctions that the Central Bank may impose.

It should be noted that a CRB is supposed to retain the information only for five years after the settlement of the defaulted sum.

Is a customer entitled to any compensation in instances of wrongful or inaccurate CRB listing?

From the case law emanating from Kenyan court, customers who have been victims of wrongful or inaccurate listings with CRBs by their banks or other credit providers have successfully sued and been awarded compensation for defamation and/or negligence. Exemplary damages may be pursued to penalize the defendants if it is proven that a CRB or bank acted with improper motives.

 Moreover, if the customer is unable to demonstrate actual damage suffered, they may still seek special damages.

If you have any questions about this article, please reach out to Divinah Ongaki at dso@smc-legal.com or info@smc-legal.com