HELB Interest Rate And Penalties Are Unconstitutional

By Lynnet Okumu / Published August 23, 2022 | 9:53 am

KEY POINTS

HELB argued in defense that the three petitioners had defaulted on payments at some point during their careers and failed to notify the board, resulting in the exorbitant monthly fines.

KEY TAKEAWAYS

According to the court, therefore, it would be unfair to have the loan continue attracting interest plus penalties ad infinitum. With the shrunken economy and scarce employment opportunities, it is a nightmare for these loanees. The monthly fines would eventually make the amount irrecoverable.

Beneficiaries of the Higher Education Loans Board (HELB), especially the youth, who have fallen behind on repayments can now feel relieved after the High Court of Kenya ruled that the interest rates charged were exorbitant.

According to the full ruling, which was delivered on Friday, August 19, HELB is not entitled to recover interest that exceeds double the amount advanced.

“A declaration hereby issues that the respondent is not entitled to recover from the petitioners or its loanees an amount exceeding double the amount advanced in contravention of the in duplum rule read part of the ruling.

The court stated that even though the fund may have been established to help the less fortunate access education, the loanees are helpless students who acquire the subject loans to finance their education.

In most cases, after studies, the majority of these loanees find themselves jobless. The loan matures before they secure employment and interest and penalties kick in.

Moreover, it was established that the socioeconomic rights of the loanees under Article 43 (1) (e) and (f) and consumer rights under Article 46(1) (c) of the Constitution have accordingly been violated. This has the counter-effect of making it difficult for them and others in the same situation to conveniently repay the loan.

The petition was filed by three HELB defaulters, Anne Mugure, Davis Nguthu, and Wangui Wachira in March 2021 after the board threatened to publish their images in newspapers to compel them to settle their loans.

The three decried that the board contravened the duplum rule and awarded all defaulters a monthly fine of 5,000 shillings whenever they failed to remit their payments. This, in turn, multiplied the interest rate to more than double the principal amount

HELB argued in defense that the three petitioners had defaulted on payments at some point during their careers and failed to notify the board, resulting in the exorbitant monthly fines.

The board also claimed that the duplum rule only applied to the banking industry, and in this case, Helb was not a bank.