Borrower loses bid to stop lender from repossessing his car

A borrower who defaulted on a vehicle loan has lost his appeal to prevent the lender from repossessing his car.

The High Court in Eldoret dismissed the appeal, finding that the Small Claims Court adjudicator had correctly allowed the lender’s counter-claim of Sh274,507. 

In a judgment delivered on May 4, Justice Reuben Nyakundi upheld the findings, ruling that Ahmed Abubakar remains bound by his contractual obligations to Momentum Credit Limited and Antique Auctions Agencies. 

The dispute stemmed from a loan facility of Sh180,000 advanced to Abubakar on August 22, 2023 for the purchase of a motor vehicle.

Under the terms of the agreement, the borrower was required to make monthly instalments of Sh18,564 over twenty-four months, bringing the total repayment to Sh445,561 inclusive of interest and fees.

The relationship soured when the lender, Momentum Credit, moved to attach the vehicle through Antique Auctions Agencies following a default in repayments. 

Abubakar subsequently filed a claim at the Small Claims Court, seeking a declaration that the contract was vitiated by law and that the interest charged was more than twice the disbursed sum. 

He specifically challenged the addition of insurance premiums and various fees, arguing they breached the Consumer Protection Act. 

The trial court dismissed his claim and allowed the lender’s counter-claim, triggering the appeal.

In his appeal, Abubakar argued that the lender had breached multiple provisions of the Consumer Protection Act, including failing to disclose the cost of borrowing as required under Section 56, denying him the option to choose his own insurer under Section 58 and failing to deliver an initial disclosure statement under Section 65.

His counsel submitted that the loan schedule indicated a total payment more than twice the disbursed amount, violating the in-duplum rule and amounting to unjust enrichment.

The lender countered that all statutory requirements were met and that the borrower had admitted defaulting on repayments.

"The appellant had been issued with a loan details confirmation disclosing all material terms, including interest, loan amount, and instalments," the respondent’s counsel argued.

The lender asserted that as a non-deposit-taking micro-lender, their interest rates were contractual rather than regulated by the Banking Act.  

In his determination, Justice Nyakundi observed that the letter of offer signed by both parties was "crystal clear" regarding the terms of the facility. 

“What the appellant seems to be asking this court to do is to rewrite the contract of lender-loanee agreement as entered with the first respondent on August 22, 2023 by invoking the Consumer Protection Act and the issues of interest chargeable,” the judge stated. 

“There is no evidence as of now that following the signing of the letter of offer and the other instruments the interest chargeable on the loan was unconscionable, punitive and excessive for the Court to interfere with those terms of the contract.”

On the allegation that the auctioneer failed to issue proper notices under the Auctioneers Rules, the judge held that any breach by the auctioneer could not be used to rewrite the primary contract. He noted, however, that the borrower could pursue a separate claim for damages if he had evidence of irregularities in the repossession process.

Justice Nyakundi dismissed the appeal, affirming the lower court’s order that Abubakar must pay the outstanding loan balance to secure the return of his vehicle and discharge of the logbook.