CAK Slaps GT Bank with Ksh 33 Million Fine for Misleading ASL Limited

The Competition Authority of Kenya (CAK) has ordered Guaranty Trust Bank Kenya Limited to pay a penalty of Ksh 33,180,000 for engaging in false and misleading representations and unconscionable conduct against its customer, ASL Limited, contrary to the Competition Act.

Additionally, the Authority has ordered GT Bank Kenya Limited (GT Bank) to refund ASL Limited (ASL) Ksh 13,211,285, being the summation of the fees and charges determined as improperly levied.

CAK said the investigation into GT Bank’s conduct was occasioned by a complaint lodged with the Authority by ASL on October 5, 2024, alleging unfair treatment in the management of and renewal of its credit facilities held with the bank.

GT Bank & ASL Case

ASL had maintained a banking relationship with GT Bank since 2001. In July 2021, ASL secured credit facilities including overdrafts, letters of credit, guarantees, asset financing, and working capital support.

The facilities were secured against the company’s assets and personal guarantees by the directors of ASL.

The facilities were scheduled to expire in May 2022, subject to review and renewal.

In January 2022, ASL submitted a formal request for renewal, within the period prescribed in the agreement.

In its complaint, ASL alleged that despite numerous engagements over several months, GT Bank did not issue a definitive position on the renewal application.

In June 2023, GT Bank offered a three-month extension on the facility for the process to be finalized. ASL was required to provide additional security, among other demands, which it accepted. ASL also accepted other revised requirements, including reducing one trading line from USD 5.5 million to USD 3.5 million and retaining cleared collateral.

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However, a month later, the bank issued a new offer letter, further reducing the limits by USD 3 million. ASL requested time to deliberate internally. Upon concluding that the facility amounts and terms on offer were not agreeable, ASL notified GT of its intention to transfer its facilities to I&M Bank.

On 31 October 31,  2023, ASL received a formal default notice and was charged Ksh 13.2 million in default interest, allegedly backdated to August 2023, when the renewal process had commenced.

To facilitate the takeover by I&M Bank and avert business disruptions, ASL cleared the two overdraft amounts: OD1 (KES) Ksh 417,848,415 and OD2 (USD) USD 197,802.

Following the reporting of the matter to the Authority, but before the start of the investigation, GT Bank offered to refund Ksh 2.8 million, against the disputed amount of Ksh 13.2 million.

ASL rejected the amount and sought a full refund, arguing that the default interest was unfairly and improperly applied.

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CAK Launches Investigations

Subsequently, the Authority initiated an investigation into ASL’s complaint and invited GT Bank to respond to the allegations.

The investigation was premised on possible violations of section 55 of the Competition Act on false or misleading representations, and sections 57(1) as assessed under sections 57(2)(a), (b), (d) and (e) concerning unconscionable conduct during business transactions.

Upon analyzing the evidentiary information, the Authority determined that GT Bank violated Section 55(a)(ii) of the Competition Act on false or misleading representation regarding the standard, quality, or value of banking services, by:

•  Continuing to charge fees for unapproved facilities.
• Misleading ASL about the availability and approval status of the services.
• Applying default interest retroactively without prior notice, thereby misrepresenting ASL’s account status.
• Referring to materially altered offers as renewals, thus misrepresenting the continuity and nature of the services.
• Making partial refunds without proper admission or transparency may confuse or mislead the consumer about the accuracy of service charges.

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Mr David Kibet Kemei the Director General Manager of Competition Authority of Kenya
Image/CAK