HELB Loans 2022-2023 First-time Applicants"/>Higher Education Loans Board (HELB) loan recipients who missed payments can now breathe a sigh of relief after the High Court in Nairobi declared the interest rates charged to be unlawful.
The Board is not allowed to reclaim interest that exceeds double the amount advanced, according to the entire judgment that was given on Friday, August 19.
Part of the judgment stated, "A declaration hereby issues that the respondent is not entitled to collect from the petitioners or its loanees an amount exceeding double the amount advanced in violation of the in duplum rule."
According to the rule, if a beneficiary borrows Ksh100,000 from HELB, they are only eligible to repay a maximum of Ksh200,000, according to Benjamin Njeru, the attorney who handled the matter on behalf of three petitioners.
"That is the Friday judgment. Simply put, if you borrowed Ksh100,000, you must pay back Ksh100,000, but since it's a loan, there are issues with interest, and a Ksh5,000 monthly fee is imposed. "In the event that you cease paying and this loan becomes non-performing and the interest exceeds Ksh100,000," it states. You will never pay more than Ksh200,000 because the law only caps interest and fines at Ksh100,000.
In March 2021, the three defaulters—Anne Mugure, Davis Nguthu, and Wangui Wachira—filed a lawsuit to contest the excessive interest rate after the board threatened to broadcast their photographs in the media unless they paid off the loans.
The three complained in their petition that the board had broken the duplum rule by fining all defaulters Ksh5,000 each month for every payment they had not made. As a result, the principal amount was more than doubled by the interest rate.
According to the duplum rule, interest stops accruing on any amount owed once it reaches the same level as the loan's advance amount.
While Nguthu, who received Ksh146,090 in July 2016, saw her loan soar to Ksh335,207 as of March 2021, Mugure, who received Ksh82,980 in July 2004, saw her defaulted loan balloon to Ksh540,464 in 2016.
By February 2021, Wachira had increased the Ksh135,000 it had borrowed to Ksh336,573.
"The petitioners claimed that the respondent had broken both the law and the Constitution. that the debt had grown to be more than double the original amount due to the imposition of interest, fines, and penalties, "read a portion of the petition.
In its defense, HELB contended that the three petitioners had at some point in their careers fallen behind on their payments and had neglected to tell the board, resulting in the astronomical monthly fines.
The board's representative, Rachel Kipkech, contended that the interest rates were set in accordance with the legislation, which mandates loan payback within a year of study completion and punishment of at least Ksh 5,000 for each outstanding debt deduction.
The board had additionally contended that the duplum regulation only applied to the banking industry because Helb was not a bank.
However, the court ruled that HELB had violated the Kenyan Constitution by levying interest rates and fines or penalties that exceeded the principal sum.
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