A Thika court has granted significant relief to a borrower after sharply reducing a lender’s claim over a vehicle financing facility, ruling that the interest charged was excessive and bordering on exploitation.
In a landmark judgment delivered on June 2, 2026, the Small Claims Court in Thika cut the lender’s demand from Sh677,381 to Sh100,631 after finding that the amount claimed far exceeded what was legally recoverable.
The beneficiary of the ruling, Aziz Daniel Odoyo Nyumbah, had secured a Sh400,000 asset financing loan on June 7, 2022, from Mogo Auto Limited, using the logbook of his motor vehicle as collateral.
Court records show that he had already repaid Sh299,369 before falling into arrears.
The dispute arose after the lender moved to court seeking Sh677,381, arguing that Nyumbah had defaulted on the loan and that the security used to secure the facility had allegedly gone missing, preventing it from exercising its right of sale to recover the outstanding debt.
Nyumbah acknowledged taking the loan and admitted he had defaulted on repayments. However, he challenged the amount being demanded, maintaining that after paying Sh299,369, the outstanding balance stood at Sh100,631.
He further argued that the lender was unlawfully seeking to recover nearly Sh1 million from a loan of Sh400,000 through excessive interest charges and penalties that were never agreed upon.
During the hearing, the lender’s customer operations manager testified that interest on the facility was charged at a flat rate of 2.4 percent per month over a period of 36 months.
The witness also confirmed that the original logbook remained in the lender’s possession, contradicting earlier assertions that the security had been lost.
In determining the matter, the court applied the in duplum rule, a legal principle that limits the amount of recoverable interest to the value of the original loan advanced.
The court also rejected several fees, penalties, and charges that it found had not been adequately explained or justified.
The magistrate observed that a straightforward calculation of the loan terms showed that, by the end of the 36-month repayment period, the borrower would have paid interest equivalent to about 86.4 percent of the principal amount, excluding additional charges contained in the agreement.
The court concluded that the interest levied on the facility was disproportionate and approached an oppressive level, making it unreasonable to enforce the lender’s full claim.
Consequently, the court held that the actual amount outstanding was Sh100,631, representing the unpaid portion of the principal after accounting for the repayments already made by the borrower.
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