Borrower loses bid to stop lender from taking his car

A borrower who defaulted on a vehicle loan has lost his appeal seeking to stop the repossession of 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 earlier findings, ruling that Ahmed Abubakar remains bound by his contractual obligations to Momentum Credit Limited and Antique Auctions Agencies.

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

Under the agreement, he was required to repay the loan in monthly instalments of Sh18,564 over 24 months, bringing the total repayment to Sh445,561, inclusive of interest and fees.

The relationship later deteriorated after Momentum Credit moved to attach the vehicle through Antique Auctions Agencies following a default in repayments.

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

He also challenged the inclusion of insurance premiums and various fees, arguing that they violated the Consumer Protection Act.

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

In his appeal, Abubakar argued that the lender breached several provisions of the Consumer Protection Act, including failure to disclose the cost of borrowing under Section 56, denial of the option to choose his own insurer under Section 58, and failure to issue an initial disclosure statement under Section 65.

His counsel submitted that the loan schedule showed a total repayment amount more than twice the principal, which he said violated the in-duplum rule and amounted to unjust enrichment.

The lender opposed the appeal, arguing 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 submitted.

The lender further argued that as a non-deposit-taking micro-lender, its interest rates were contractual and not regulated under the Banking Act.

In his determination, Justice Nyakundi observed that the letter of offer signed by both parties was “crystal clear” on 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 allegations 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 and upheld the lower court’s decision, ordering that Abubakar must pay the outstanding loan balance to secure the return of his vehicle and discharge of the logbook.