Court slams KDC over illegal loan charges in Kositany case
The High Court has faulted the Kenya Development Corporation (KDC) for illegally levying excessive charges on a loan taken by the family of former Soy MP Caleb Kositany, in a ruling that underscores growing scrutiny over lending practices in the country.
In its decision, the court ruled that KDC breached the law by applying compound interest and charging interest on penalties—practices it said are prohibited under Kenya’s banking regulations.
The judge held that lenders cannot recover amounts exceeding the principal and accrued interest at the point a loan becomes non-performing.
“It is unconscionable and against consumer rights… for banks to charge interest on interest,” the court ruled, adding that any such excess charges must be refunded or adjusted to the borrower’s account.
The dispute revolves around a Sh10 million loan taken in 1996 by the late businessman Simeon Kositany through Kabobo Company Ltd. He died in 1998, leaving the debt under the management of his estate.
Court documents show that the family has since repaid Sh22.5 million—more than double the original loan. However, KDC continued to demand a staggering Sh118 million in alleged arrears and declined to release the title deed held as collateral.
The court found that there was no agreement permitting the lender to impose compound interest, noting that such charges violate the in-duplum rule, which caps recoverable interest once a loan becomes non-performing.
“In my view, there is no right to compound interest… unless expressly agreed,” the judge stated, emphasising that the law was designed to curb excessive and exploitative lending practices.
As part of the ruling, the court ordered KDC to release the title deed to the Kositany family and refund Sh1.53 million paid in excess of the statutory limit acknowledged by the lender.
The case was filed by Kositany alongside family members, including Nicholas Kibet Kositany, Truphena Chelagat Seroney and Alice Jeptoo Kositany, who are administrators of the estate.
They challenged the legality and fairness of the lender’s continued demands, arguing that the amounts claimed far exceeded what is lawfully recoverable
