Reason why Mwananchi Credit is being sued
A Kenyan firm and its director have moved to court to sue Mwanachi Credit over what they claim is inflating loan interest.
Harrogate Limited and its director Alice Muthoni Thuo are accusing the micro-lender accuses the lender of interest loan infringement for a credit facility they had applied back in 2020.
It was a Ksh.50 million credit facility that has since accrued to Ksh.177.5 million in less than two years.
In a sworn affidavit, which was seen by the Star Newspaper, the two complainants say the defendant only disbursed Ksh.43,121,980 and not Ksh.50 million as agreed.
According to the initial agreement, the borrowers were to pay an interest of Ksh.6.12 million in five months and pay the remaining balance of interest and principal on the sixth month.
The facility was attracting an interest of five percent and a loan processing fee of Ksh.2.5 million, loan application fee of Ksh.500,000 being one percent of the total loan.
They were also charged Ksh.300 for loan papers and another Ksh.300 for Credit Reference Bureau (CRB) check fees.
They contend that Mwananchi Credit only disbursed Ksh.30 million in two instalments, Sh15 million to Harrogate Limited on February 25, 2020 and a similar amount to Alice Muthoni Thuo’s account three days alter.
According to the court documents, the micro-finance was reluctant to channel the remaining balance of Sh20 million despite numerous follow ups.
Two months after getting the first tranche of the loan, the applicants received an email from the lender compelling the first plaintiff to pay Sh3.3 million interest failing which a penalty of five percent every week will apply.
They argue that rules had changed midway. On June 28 the same year, the lender informed the borrowers that the amount due was Ksh.63.26 million, implying the Ksh.30 million facility had accrued interest of over Ksh.32 million in just four months.
The affidavit shows that to avoid penalty as threatened by the defendant, Harrogate Limited paid an interest of Ksh.3.3 million on March 28, 2020 upon which the lender disbursed Ksh.5,624,980 as the second tranche of the loan.
On July 2, 2020, the defendant requested the first applicant to execute the letter of Sh7 million and insisted that the amount be utilised towards payment of the first drawdown or apply a five percent weekly penalty,
This prompted the applicants to seek clarification from the lender on August 17 via email.
The microlender did not respond but instead proceeded to have the first plaintiff execute the second Letter of Offer on September 9 for an aggregate loan amount of Ksh.76,604,792.
A few years back, the same micro-lender was accused by a section of borrowers for changing rules midway with an intention to property offered as security. It denied the claims.