GTBank fined $257k for breach of agreement with client in Kenya

The Competition Authority of Kenya (CAK) has fined Guaranty Trust Bank Kenya Limited (GTBank) approximately $257,000 (Ksh33.18 million) after finding that the lender engaged in what it described as “false and misleading representations and unconscionable conduct” against one of its customers, ASL Limited.

In a statement issued on Tuesday, February 24, the regulator directed GTBank Kenya to refund about $102,000 (KSh13.21 million) in fees it determined were improperly levied.

The case started in October 2024 after ASL filed a complaint over the management and renewal of its credit facilities. The statement by CAK outlined that the manufacturing and distribution company serving the construction and industrial sectors has been a long-standing client of GTBank for more than two decades.

ASL

The case stems from a complaint filed in October 2024 by ASL, a manufacturer and distributor serving the construction and industrial sectors.

“The investigation into GTBank’s conduct was occasioned by a complaint lodged with the Authority by ASL on 5th October 2024, alleging unfair treatment in the management of and renewal of its credit facilities held with the bank,” part of the statement reads.

Following the 16-month investigation, the regulator found that GTBank unlawfully charged fees on unapproved facilities and misled the ASL about the status of its services. The lender was also accused of backdating default interest without notice and presenting altered loan terms as routine renewals.

Also Read: House of Reps summons Access, Zenith and GTBank CEOs over unauthorised account deductions.

How GTBank Kenya breached CAK provisions

According to details provided by the CAK, ASL had been banking with GTBank since 2001. In July 2021, it secured a suite of credit facilities, including overdrafts, letters of credit, guarantees and working-capital lines, backed by company assets and directors’ guarantees.

While the facilities were set to expire in May 2022, ASL sought renewal in January 2022 within the prescribed period.

Findings by the regulator revealed that the lender failed to yield to the renewal request after months of engagement. However, in June 2023, GTBank granted a three-month extension while requiring additional security and revising certain terms, including reducing the trading line from $5.5 million to $3.5 million and retaining cleared collateral.

Meanwhile, the issue further escalated when the bank issued a fresh offer letter with additional reductions to the facility limits.

“However, a month later, the bank issued a new offer letter, further reducing the limits by USD 3 Million. ASL requested time to deliberate internally. Upon concluding that the facility amounts and terms on offer were not agreeable, ASL notified GT of its intention to transfer its facilities to I&M Bank,” part of the statement reads.

Following the request, ASL received a formal default notice in October 2023 and was charged KSh13.2 million in default interest, allegedly backdated to August 2023.

In its move to facilitate the takeover and avoid business disruption, ASL cleared overdraft balances of KSh417.8 million and $197,802. GTBank subsequently offered to refund KSh2.8 million as a goodwill gesture, which ASL rejected, seeking a full refund.

Competition Authority of Kenya (CAK)

According to its investigation, the CAK found that changes made to the loan terms and the manner in which they were handled suggest that GTBank’s conduct breached provisions of the Competition Act relating to consumer protection. After which, the authority imposed both financial penalties and compliance directives on the lender.

Providing reasons for setting the penalty at 2% of the bank’s 2023 gross annual turnover, below the statutory maximum of 10%, CAK said it weighed mitigating and aggravating factors under its administrative remedies guidelines.

“Premised on the above findings, the Authority ordered Guaranty Trust Bank Kenya Limited to pay a pecuniary penalty of KES 33,180,000.00, being 2% of its Gross Annual Turnover for the year 2023; refund ASL Limited KES 13,211,285 within 30 days,” the penalty reads.

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