Court ruling leaves CRBs in catch-22 situation
Loan defaulters who have been blacklisted by a Credit Reference Bureau (CRB) are not obligated to write to it to seek clearance of their names, especially when the negative listing is erroneous.
The High Court in Mombasa has ruled that it is not a mandatory requirement for affected individuals to approach the institution, through writing, to have their names deleted from its database or websites.
The judge made this ruling in a case in which Mr George Adang’ahi Karani has sued Jamii Bora bank over erroneous listing as a loan defaulter with the CRB.
Justice Dorah Chepkwony interpreted the meaning of Regulation 35 (5) of the Banking (Credit Reference Bureau) Regulations, 2013, to mean that the affected party may as well choose not to write to the institution for name clearance.
The regulation provides that where the customer believes that the information contained in the database is inaccurate, erroneous, or outdated, the customer may notify the bureau in writing of the information disputed.
The judge noted that the wording of the regulation is not couched in mandatory terms because the word “may” is used.
“It was therefore not a mandatory requirement that Mr George Adang’ahi Karani writes to CRB requiring them to delete his name from their website,” Justice Chepkwony said.
The court further noted that the provision under the regulation is one under the discretion of the court.
The ruling has paved the way for the businessman to seek damages, if any, that he suffered when he was erroneously listed in the CRB as a loan defaulter, thereby making his loan requests to lenders rejected over the negative listing.
The bank had advanced him the loan through Kakaneni Welfare Group. He had initially sued CRD but dropped the case to pursue damages with the bank for wrongly enlisting him in the bureau as a defaulter.
Court documents indicated that the businessman joined the institution’s microfinance bank in 2004, where he would contribute savings and get loan facilities in return.
In 2005, the welfare group withdrew from the bank, and all its members were relieved from any debts and liabilities owed to the financial institution.
So when he applied for a loan from the Kenya Commercial Bank in 2016, his request was declined, because a CRB had blacklisted him, for an alleged default in a loan owed to the bank.
He thereafter approached the court for damages for wrongful listing.
The businessman claimed that he was falsely and maliciously listed as a defaulter since there was no money owed to the bank.
He told the court that the decision to list him as a defaulter has caused him distress, agony, mental torture, and humiliation in the eyes of the public.
“My means of securing a livelihood has been cut off as I can no longer secure various jobs,” he said
Mr Karani claimed that he has suffered damages and wants the court to grant him aggravated and exemplary damages for defamation.
The bank, in its statement of defence, acknowledged that the businessman’s name had been erroneously submitted to the CRB as a loan defaulter and that it issued a notice of amendments to correct the mistake.
The bank stated in court documents that the publishing was erroneous and not malicious.
However, the bank challenged the jurisdiction of the magistrate’s court, where the claim was filed to determine the dispute and sought its dismissal, which the trial court upheld.
Mr Karani then appealed against the dismissal of the case at the High Court.
He accused the magistrate court of dismissing his case without paying attention to the issues he raised.
The businessman claimed that his case against the bank was not about the deletion of his name from CRB’s list, but for damages for defamation by being improperly listed as a loan defaulter.
But the bank argued that the case was filed prematurely because it had already sent an amendment notice to CRB to rectify or delete Mr Karani’s s name from the defaulters' list.
“Further, through a letter, the bank apologised to Mr Karani’s Welfare group for any inconveniences caused to them,” the bank defended itself.
But the court agreed with Mr Karani that his case shows that he did not only complain about the delisting of his name from CRB, but also had claims for malice and defamation, and how the same had affected him as a businessman since he couldn’t secure loans from other financial institutions.
“It is clear that the case has other live issues that ought to have been determined by the trial court such as malice and defamation to establish whether Mr Karani was entitled to damages or not. These are issues of facts which ought to be ventilated through trial," the judge said.
Justice Chepkwony has ordered the defamation case to start afresh, after finding that it was wrongly dismissed by the magistrate’s court BY DAILY NATION

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