High Court bar HELB from imposing exorbitant fines
The Higher Education Loans Board (HELB) has been ordered by the High Court to stop charging its beneficiaries interest and penalties that exceed the principal amount.
Following a case brought by three beneficiaries Ann Mugure, Davis Nguthu, and Wangui Wachira, Justice Alfred Mabeya ruled that HELB’s policy to charge exorbitant interest, penalties, and fines on non-performing student loans was unconstitutional.
“A declaration hereby issues against the respondent (HELB) that by imposing interest amounts and penalties or fines that exceed the principal amount, the respondent is in contravention of Article 43 (1) (e) and (f) and Article 27 of the Constitution of Kenya,” Justice Mabeya ruled.
The three petitioners claimed that the excessive interest and penalties levied on their loans violated their constitutionally protected socio-economic rights.
The three testified in court that they took out loans from HELB on various dates to support their undergraduate studies, but that the astronomical interest rates and penalties made it difficult for them to repay.
They said that on November 19, 2020, HELB threatened to publish the names and pictures of defaulters in national newspapers and sent out a 30-day repayment reminder via its Twitter account.
The three claimed that HELB was charging excessive interest penalties that frequently exceeded twice the amount of principal owing, making it difficult for them to repay the loan.
The petitioners had taken out a HELB loan on various occasions to help fund their undergraduate studies, but repayment was challenging due to the high interest and penalties that the debt had accrued.
In July 2004, Mugure, a young person with a disability, took out a loan from the organization for Sh82,980; as of July 2016, the amount had grown to Sh540,464.
The second petitioner, Nguthu, had borrowed Sh146,090 in July 2016; as of March 2021, he still owed the lender Sh335,207.
The loan Wangu obtained from HELB in July 2016 for Sh135,000 was worth Sh336,573 as of February 2021.
“It was therefore contended that the debts had doubled the principal amounts. That the interest rates and penalties were exorbitant and contravened the beneficiaries’ socioeconomic rights as enshrined in the Constitution and made it difficult for them to repay the loans,” stated Judge Mabeya.
The most recent inducement was a complete waiver of penalties, which the board granted in March of this year in response to the COVID-19 pandemic’s impact on the economy.
The waiver, which goes by the name of “Kamilisha Malipo Ya HELB,” was initially meant to last from March 1 to April 30, but it was later extended to June 30.
According to HELB data, the number of loan accounts in default has decreased to 94,216 from 109,661 in February.
Meanwhile, the astonishing number of unpaid debts is Sh10.2 billion.
Loan repayments of Sh870 million were made by 9,998 beneficiaries in 2018, compared to 10,110 beneficiaries who received a 100 per cent waiver in 2013 and paid off Sh1.3 billion in total.
