A micro-lender, MyCredit Limited, has been instructed to compensate a businessman in Homa Bay county with a sum of Sh860,000 for the hasty sale of a lorry that had been used as security for a defaulted loan. The Micro and Small Enterprises Tribunal found that the creditor acted unfairly by repossessing and selling Lawrence Jagiro Otieno’s lorry at a price below its market value without providing adequate notice and a fair hearing.
The case originated when Mr. Otieno, a potato farmer in Karachuonyo, Homa Bay County, applied for a loan of Sh200,000 from MyCredit Limited on April 26, 2023. The loan, which was secured by his truck, was supposed to be repaid in six monthly installments of Sh43,334 each. However, due to financial difficulties and health issues, Mr. Otieno only managed to make a partial payment of Sh100,000 on September 14, 2023. Despite his request to restructure the loan being denied by MyCredit, the lender proceeded to repossess his truck in October 2023.
Mr. Otieno argued that the repossession was done hastily and without following the correct procedures. He claimed that he was undergoing medical treatment at the time of the repossession, and the sale of his vehicle at Sh500,000, well below its market value, was unjust.
In their defense, MyCredit and the auctioneer, David Moruri, contended that the repossession and sale were lawful, as Mr. Otieno had breached the terms of the loan agreement by failing to make timely repayments. They asserted that the immediate realization of collateral was permitted in such cases.
After reviewing the evidence, the tribunal concluded that while Mr. Otieno had indeed breached the loan agreement, the repossession and subsequent sale of the vehicle were rushed and unjustified. The lender’s failure to notify Mr. Otieno of their intention to sell the vehicle, as required by law, was criticized by the tribunal.
The tribunal awarded Mr. Otieno a total of Sh860,000, which included the forced sale value of the truck minus the outstanding loan balance, along with interest. Additionally, Mr. Otieno was granted compensation of Sh60,000 per month for the loss of income from the date of repossession until full payment was made.
This ruling highlights the importance of lenders following statutory procedures when enforcing loan agreements. It serves as a reminder that even in cases of borrower default, lenders must act fairly and ethically, avoiding punitive measures that go against public policy.
