Christopher Ndolo and Caroline Njoki secured a Sh10 million loan but a variation in interest rates exposed them to auctioneers.
Mr Ndolo and Ms Njoki had jointly obtained Sh10,530,000 from CFC Stanbic Bank Ltd in July 2007 and the interest rate was pegged at 13 per cent. The bank agreed to inform them of any interest variation through letters.
The two moved to the High Court seeking to block CFC Stanbic from auctioning their security; a piece of land, after they were unable to repay.
They claimed the bank altered the rate of interest without informing them. They argued that the rates of interest levied by CFC Stanbic were too exorbitant.
They also argued that the rates of interest levied by CFC bank were too exorbitant and served to clog the equity of redemption.
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Justice Alfred Mabeya ruled the bank erred in increasing the interest rate from 13 per cent to 13.75 without informing Ndolo and Njoki as agreed.
THE RULING
“From the evidence on record, the defendant seems to have applied the rate of interest of 13.75 per cent from the commencement of the loan facility.
“There is no evidence to show that the plaintiffs (Ndolo and Njoki) were notified of the charge from 13 per cent to 13.75 per cent in terms of the contract between the parties.
“Accordingly, the increase of the interest rates for the period 2007 and September, 2007 was irregular and without any basis,” the judge ruled.
