Kenyan borrowers could be headed for a major reprieve after a petitioner moved to the High Court seeking to stop commercial banks from raising loan interest rates, default charges and other lending fees without approval.

The petition, filed by Francis Awino, targets the Central Bank of Kenya, the Attorney General and the Kenya Bankers Association on behalf of licensed commercial banks. Awino wants the court to intervene, arguing that lenders have been using loan agreements to increase borrowing costs without proving compliance with the Banking Act and constitutional safeguards on fairness, transparency and consumer protection.

In court papers, Awino claims banks have been relying on contractual clauses to vary lending rates, introduce penalty charges and reprice loans, while failing to demonstrate that the changes comply with Section 44 of the Banking Act.

He wants the court to issue temporary orders restraining banks from enforcing any upward interest-rate adjustments, default charges, risk-based pricing increases or similar loan charges based solely on unilateral contractual provisions, pending the hearing and determination of the case.

“Banks should not be allowed to use standard loan contracts to sidestep statutory and constitutional protections meant to shield consumers from unfair lending practices,” he says in court documents.

Awino is also seeking orders compelling the Central Bank and the Kenya Bankers Association to file in court and publish a detailed breakdown of commercial banks’ lending practices between 2024 and 2026. The information sought includes effective lending rates, loan repricing clauses, default charges, penalty fees, collateral recovery data and the internal or regulatory frameworks used to vary customer loan pricing.

He further wants disclosure on the extent of banks’ investments in government securities compared to lending to the private sector, as well as the policies and supervisory frameworks guiding those decisions.

The petitioner argues that the current lending model is opaque, unreasonable and procedurally unfair, and violates the right to fair administrative action under the Constitution and the Fair Administrative Action Act.

He claims that unilateral interest-rate changes and hidden loan repricing mechanisms threaten consumer rights, property rights and socio-economic rights protected under the Constitution.

Awino further argues that Section 44 of the Banking Act cannot be overridden through standard form contracts signed between banks and customers.

He warns that unless the court steps in, borrowers, mortgage holders, depositors and small businesses risk continued harm through disputed interest hikes, penalties, auction threats, repossessions and negative credit listings. He wants banks barred from listing, penalising, auctioning or repossessing borrowers over contested interest-rate increases unless they first obtain leave of the court.