HELB issues public clarification after landmark ruling student loan borrowers
HELB issues public clarification after landmark ruling student loan borrowers
The Higher Education Loans Board (HELB) has issued a public clarification regarding its compliance with the ‘in duplum’ rule following a landmark High Court judgment that favored student loan borrowers.
In a statement released on Wednesday, December 3, the statutory lender sought to reassure loan beneficiaries that it is operating within the legal framework.
“Following the High Court judgement in Mugure & 2 Others v HELB (2021), we wish to clarify that HELB fully complies with the ‘In Duplum’ Rule. This means that all the HELB loan accounts continue to be managed in line with the judgment,” the statement read.
The institution emphasized its commitment to fair practices.
“HELB remains committed to fair, lawful, and transparent loan management for all alumni/beneficiaries. For assistance, please reach out to us via our official customer support channels & contacts.”
The High Court ruling in question centered on a petition filed on March 23, 2021, by Kenyan citizens who were beneficiaries of HELB loans for their undergraduate studies.
The petitioners alleged that HELB had been charging excessive interest and penalties that often more than doubled the principal amounts borrowed, making loan repayment extremely difficult.
According to court documents, the petitioners borrowed loans on various dates to finance their undergraduate education. However, they claimed the respondent had been charging exorbitant interest rates and penalties that far exceeded reasonable limits.
One particularly striking case involved a youth living with disability who borrowed Ksh 82,980 in July 2004 at a 2% interest rate. By July 2016, the debt had ballooned to Ksh 540,464.10.
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Another petitioner borrowed Ksh 146,090 in July 2016, but by March 2021, the amount owed had grown to Ksh 335,207.28. A third petitioner’s loan of Ksh 135,000 taken in July 2016 had increased to Ksh 336,573.83 by February 2021.
The petitioners argued that the accumulated debts had more than doubled the principal amounts, violating the in duplum rule, a consumer protection principle enshrined in the Constitution.
They also contended that beneficiaries with non-performing loans were being denied clearances necessary for job applications, effectively being shut out of employment opportunities in both private and public sectors.
The ‘in duplum’ rule is a consumer protection law in Kenya that caps the total interest on a non-performing loan at the original principal amount. Once the accumulated interest equals the principal, no further interest can be charged.
This principle is firmly established in Kenyan law, stipulating that interest ceases to accumulate on any capital amount owed once the accrued interest equals the outstanding capital, regardless of whether the debt arises from a financial loan or any contract involving capital payment with interest.
The High Court ruled decisively in favor of the petitioners, quashing HELB’s practice of charging penalties that resulted in debts ballooning to amounts far exceeding the original loans.
HELB had attempted to argue that the ‘in duplum’ rule did not apply to them because they were not a bank but a statutory lender. The Court disagreed with this interpretation.
The judgment made clear that the ‘in duplum’ rule binds every lender, including HELB, and that borrowers should not be required to pay more than twice the principal amount.
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