25/07/2022
High Court Warns Money Lenders
By Dickson Jere
In another landmark Judgment, the High Court (Commercial Division) has warned loan sharks and money lenders to desist from charging illegal and high interest rates and making borrowers sign sale agreements of properties as collateral.
In this case, a lender loaned his “friend” K70,000 with monthly interest of 30%. The loan was secured by contract of sale of the property and the lender even placed a caveat on the property as “intending purchaser” of the property.
After default on both principal and interest, the lender and borrower signed another loan agreement based on the outstanding amounts of K156,000 from the first loan as second loan even though no money was advanced to the borrower.
This triggered the case that was before Judge Bonaventure Mbewe in which the Borrower challenged the interest rate charged as “unconscionable” and that he did not sell his property to the lender but merely used it as collateral.
Having analyzed the facts, the Court found that the interest rate of 30% was illegal. He also found that the sale agreement between the two parties was a nullify because what was intended was the equitable mortgage and not sale.
“The contract of sale and assignment executed herein are hereby nullified and cancelled by this Judgement,” the Judge ruled and directed the Registrar at the Ministry of Lands to remove the caveat on the property that was placed by the lender.
“The rate of interest applicable on the loan is simple interest at the maximum rate of 30% per annum, and not per day, from the date of the loan contract, he said in his 26-page Judgment, delivered few weeks ago.
The lender was asked to keep the Title Deeds as equitable mortgage and release it to the borrower once the loan was repaid on the new conditions set by the Court.
Having nullified the sale agreement, the Judge had this warning to the money lenders in general.
“I wish to mention here that money lenders and other parties who g
