Borrowers Get a Break as New Law Makes Harassment Illegal
đź“… Date of Effect: January 1, 2025
Borrowers in Kenya now have a reason to breathe easier as a groundbreaking new law takes effect, banning the harassment of loan defaulters. This law is a game-changer in the financial sector, promising fair treatment for borrowers while setting clear boundaries for lenders.
Let’s break it down and explore what this means for you.
The prohibition against harassing borrowers in Kenya is established under the Business Laws (Amendment) Act, 2024, which took effect on January 1, 2025. This Act amends the Microfinance Act to explicitly prohibit non-deposit-taking microfinance lenders from engaging in harassment, abuse, or oppression of borrowers, guarantors, or any individuals connected with debt recovery.
The law mandates that lenders must:
- Provide borrowers with accurate information about loan terms and financial costs.
- Maintain borrower confidentiality.
- Furnish borrowers with clear details on lending and recovery procedures.
These provisions aim to protect borrowers from unethical debt collection practices and ensure transparency in the lending process.
What’s the New Law About?
Simply put, the law makes it illegal for lenders or debt collectors to harass borrowers. This includes practices like:
- Making excessive calls.
- Using threats or abusive language.
- Publicly shaming borrowers who fall behind on their repayments.
The goal? To protect borrowers from unfair practices while promoting ethical debt recovery methods.
Why Is This Important?
In recent years, many Kenyans have shared horror stories about relentless calls, public humiliation, and even threats from lenders. For those struggling to repay loans, the added stress of harassment only made a tough situation worse.
This new law recognizes the need for dignity and fairness in debt recovery. Borrowers will now have legal protection against any lender or debt collector who crosses the line.
What Does This Mean for Lenders?
While the law clamps down on harassment, it doesn’t let borrowers off the hook. Lenders still have the right to recover their money—but now, they must follow fair and ethical practices. This creates a level playing field where both parties are held accountable.
Lenders will need to:
- Use professional and respectful communication.
- Work within the legal framework to resolve repayment issues.
- Avoid excessive or intrusive debt recovery measures.
What’s Next for Borrowers?
If you’ve ever felt harassed by a lender, this law gives you the power to push back. Borrowers now have legal recourse to report any unethical debt recovery practices.
However, it’s important to remember that this law doesn’t mean you can avoid paying your debts—it’s about ensuring repayment processes are fair. Borrow responsibly, communicate with your lender, and explore repayment options if you’re struggling.
Why This Matters for Kenya’s Financial Sector
This law is not just about protecting borrowers; it’s about strengthening trust in the financial system. By promoting fairness and professionalism, the new regulations encourage more Kenyans to engage with formal financial services without fear of mistreatment.
For lenders, this is an opportunity to innovate, offering more transparent loan terms and better repayment support to borrowers.
Final Thoughts
Kenya’s move to outlaw borrower harassment is a bold step toward a more ethical and balanced financial ecosystem. Borrowers can now enjoy greater peace of mind, while lenders are challenged to uphold fairness and professionalism.
At Maawiy Financial Advisory Services (MFAS), we believe in promoting financial literacy and ethical practices in all financial dealings. Stay tuned to our blog for more updates, insights, and tips to navigate the ever-evolving financial landscape.
đź’¬ What are your thoughts on this new law? Will it make a difference? Share your views in the comments below!
