Kenya Penalizes GT Bank Over ASL Dispute Practices

A Kenyan regulator has ordered GT Bank to pay approximately $257,000 (KES 33,180,000) and refund ASL roughly $102,000 (KES 13,211,285) in improperly levied charges. The ruling follows a complaint lodged by ASL, a diversified company serving the construction, electrical, and industrial sectors, alleging unfair handling of its credit facilities.

Background of the Dispute

ASL has maintained a banking relationship with GT Bank since 2001, utilizing multiple credit lines including overdrafts, letters of credit, and guarantees secured by company assets and directors’ personal guarantees. In early 2022, ASL initiated the process to renew these facilities. However, the company claims GT Bank delayed providing a clear response while repeatedly altering conditions, such as demanding additional security and significantly reducing credit limits.

Regulator: Bank misled and pressured its client

The Authority found that GT Bank misrepresented the status of ASL’s facilities by charging fees on unapproved services and applying default interest retroactively without prior notice. It also faulted the lender for presenting materially altered offers as routine renewals, potentially confusing the customer. These actions, according to the Authority, violated provisions of the Competition Act concerning false or misleading representations.

Furthermore, the regulator determined that the bank acted unconscionably, leveraging its stronger bargaining position to impose unnecessary conditions and exert undue pressure on ASL, particularly after the company indicated it intended to move its facilities to I&M Bank.

Backdated interest sparks outcry

A key point of contention was $102,000 in default interest that ASL asserted was unfairly backdated to August 2023, well before any alleged default was communicated. While GT Bank offered a $21,705 refund as a “goodwill gesture,” ASL rejected it, demanding a full refund.

The Authority determined the fine based on both mitigating and aggravating factors. The penalty, equivalent to 2% of GT Bank’s 2023 gross turnover, was deemed proportionate to the severity and impact of its conduct, despite the Competition Act allowing for penalties up to 10% of a business’s annual turnover.

In addition to the penalties and refund, the regulator directed GT Bank to comply with all provisions of the Competition Act and to train its staff, particularly those handling credit facilities, on fair business practices and regulatory requirements.

The ruling highlights Kenya’s increasing scrutiny of financial sector conduct and signals a firmer stance against lenders who exploit information imbalances or apply punitive terms without transparency. For ASL, the decision represents a vindication after years of experiencing what it described as opaque and shifting conditions that hindered its operations.