Harambee Sacco And Faulu Microfinance Fined For Misleading Representation on Loans

Harambee Sacco and Faulu Microfinance have been fined by the Competition Authority of Kenya (CAK) for “misleading representation on loans” issued to their various customers.

Harambee Sacco is one of the largest group in Kenya in terms of deposits from their clients while Faulu Microfinance is one of the micro lending institutions in the country lending mostly to SMEs.

According to CAK, the two entities contravened sections of the Competition Act that were aimed at protecting consumers from misleading representations as well as engaging in unreasonable conduct.

Harambee Sacco was fined 38,379 shillings while Faulu Microfinance was fined 150,000 shillings according to a Kenya Gazette notice released on Friday (last week).

Previously, customers for both Harambee Sacco and Faulu Microfinance Bank had raised complains over some hidden charges that the companies were charging them on loans disbursed.

“The Authority investigated the claims and made findings pointing to withholding information or failure to disclose information to consumers contrary to Section 55 and Section 56 of the Act,” said the authority.

According to section 55 (b) (i) of the Competition Act, insurers and micro-finance institutions are not allowed to give false or misleading information on the price of goods and services, in this case, loans.

Section 56 (4) of the same Act compels companies to inform customers of all fees intended to be charged for provision of a service, something both Harambee and Faulu failed to do.

“The two cases highlighted in the Kenya Gazette of July 26th, 2019 originated separately from consumer complaints. Section 70A of the Act provides that a consumer can lodge a complaint to the Authority and the provisions relating to fair trial as under Part III of the Act are available to the consumer,” CAK said in a statement.

The Act empowers CAK to impose a financial penalty of up to 10 percent of the value of sales of the goods or services under investigation.

Most members of Harambee Sacco are drawn from the police, the military as well as provincial administration personnel.

“In the two matters, the Complainants were restituted through reversal of the effects of the infringements effected by the Parties. Further, the Parties committed to cease engaging in any conduct that contravenes the Act.”