CAK Penalizes GTBank Over Credit Renewal Dispute with ASL Limited

Guaranty Trust Bank Kenya (GTBank) has been hit with a major regulatory penalty after the Competition Authority of Kenya (CAK) found the lender misled a corporate client and exploited unequal bargaining power during a credit renewal dispute.

The authority ordered the bank to pay a KSh 33.18 million fine and refund KSh 13.21 million to the client.

The penalty, equivalent to 2% of GTBank’s 2023 turnover, follows CAK’s determination that the lender engaged in misleading representations and unconscionable conduct in dealings with ASL Limited over the management and renewal of credit facilities.

The regulator said the conduct included retroactively applying default interest, levying charges on unapproved facilities, and repeatedly altering renewal terms as ASL attempted to transfer its accounts to I&M Bank.

According to CAK, GTBank presented materially changed offers as “renewals,” although the revisions should have been treated as new or amended proposals. The authority also found that default interest was imposed without prior notice and backdated, while partial refund offers from the bank lacked transparency and could themselves mislead the client.

CAK anchored its enforcement on Sections 55 and 57 of the Competition Act, which address abuse of superior bargaining power.

In addition to financial sanctions, GTBank has been ordered to comply with the Competition Act, train staff on competition law, and refund ASL within 30 days.

Timeline of Events

• July 2021: ASL Limited secured multiple credit facilities, including overdrafts, letters of credit, and asset financing, backed by company assets and personal guarantees.
• 2022 – June 2023: As the facilities approached expiry, the bank delayed definitive communication on renewal, later offering a three-month extension.
• July 2023: GTBank issued an initial renewal offer; a month later, it revised the terms, reducing credit limits by USD 3 million.
• Facility Takeover: ASL notified GTBank of its plan to transfer facilities to I&M Bank, settling overdraft balances totaling Sh417.8 million and USD 197,802.
• Retaliatory Charges: GTBank issued a formal default notice and charged Sh13.2 million in backdated default interest, effective August 2023, without prior notice.

Regulatory Findings

CAK concluded that GTBank breached the Competition Act through:

• Misleading representations about account status and availability of services.
• Unconscionable conduct, using superior bargaining power to pressure the client into unfavorable terms.
• Improper levies, including retroactive default interest and reclassifying materially altered terms as routine renewals.

The dispute originated from a complaint filed on October 5, 2024, by ASL, a corporate client of GTBank since 2001. ASL operates in the construction and industrial sectors.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.