In Kenya’s tightly wound credit market, disputes over loan renewals are not unusual. What is unusual is when such a dispute results in a multimillion-shilling penalty under competition law. That is precisely what happened when the Competition Authority of Kenya fined Guaranty Trust Bank Kenya Limited KSh33,180,000 for what it described as false and misleading representations and unconscionable conduct against its long-standing customer, ASL Limited. In addition, the regulator ordered the bank to refund KSh13,211,285, the sum it determined had been improperly levied in fees.  

At stake was not merely a contested interest charge, but a larger question about how far a lender may go in altering credit terms, and when commercial flexibility crosses into statutory breach.  

A Relationship That Spanned Two Decades  

ASL, a diversified industrial firm supplying Kenya’s construction and manufacturing sectors, had banked with GT Bank since 2001. In July 2021, it secured a suite of credit facilities, including overdrafts, letters of credit, guarantees, and working capital support. These facilities were backed by company assets and personal guarantees from directors, and were due to expire in May 2022, subject to review.  

In January 2022, ASL applied for renewal within the contractual period. According to the Authority’s decision, however, the process did not yield a clear outcome for months. By June 2023, the bank offered a three-month extension, requiring additional security and reducing one trading line from US$5.5 million to US$3.5 million. ASL accepted these revised terms, apparently to preserve continuity.  

Yet only a month later, a new offer letter reduced the limits by a further US$3 million. At that point, ASL requested time to deliberate and eventually notified the bank of its intention to transfer its facilities elsewhere. Then, on 31 October 2023, a formal default notice arrived. The company was charged KSh13.2 million in default interest, allegedly backdated to August 2023 during the renewal process. To facilitate a takeover by another bank and avoid disruption, ASL cleared overdrafts exceeding KSh417 million and US$197,802.  

Was this an aggressive but lawful exercise of contractual rights, or did it amount to something more troubling? That became the central issue once ASL lodged a complaint with the Authority in October 2024.  

The Legal Line Between Discretion and Misrepresentation  

The Authority’s investigation was grounded in Sections 55 and 57 of the Competition Act. The first addresses false or misleading representations. The second concerns unconscionable conduct, defined as unfair or oppressive practices that exploit vulnerability or unequal bargaining power.  

In its findings, the Authority concluded that GT Bank had crossed both lines. It held that the bank continued charging fees for facilities that were not properly approved and misled ASL about the availability and status of certain services. More critically, it found that default interest had been applied retroactively without adequate notice, thereby misrepresenting the company’s account position. Even the description of materially altered offers as mere “renewals,” the Authority reasoned, created a false impression of continuity.  

At what point does a variation become a misrepresentation? The Authority’s answer appears to be that when changes fundamentally alter the nature or value of a service, they cannot be presented as routine extensions without clear disclosure.  

On the issue of unconscionable conduct, the reasoning went further. The Authority observed that GT Bank, as a commercial lender with substantial financial resources, held significantly greater negotiating power. It found that the bank reduced facility limits, demanded additional security, and backdated charges in a manner that placed ASL under financial strain, especially as it sought to transition its facilities. Repeated changes and conditional offers, the Authority concluded, impaired the company’s ability to make fully informed decisions.  

Here, the broader policy question emerges. Should competition law intervene in what appears to be a bilateral contractual dispute between sophisticated parties? The Authority’s decision suggests that it should, at least where the imbalance of power and the opacity of communication risk distort fair market conduct. In other words, even corporate clients are not beyond the protective reach of consumer welfare provisions if the circumstances warrant it.  

The Bank’s Defence and the Appeal  

GT Bank rejected the allegations during the investigation. It argued that the credit facilities were governed by Letters of Offer issued in 2021, which expressly permitted variation of interest rates and the charging of default interest. Renewal beyond May 2022, it maintained, was conditional upon additional security and internal risk assessments. The bank denied coercion, asserting that default provisions were triggered by ASL’s failure to execute the July 2023 offer. Its earlier proposal to refund KSh2.8 million, it said, was a gesture of goodwill rather than an admission of fault.  

The Competition Act allows penalties of up to 10 per cent of a firm’s preceding year’s gross annual turnover. Applying its Consolidated Administrative Remedies and Settlement Guidelines, the Authority imposed a penalty equivalent to 2 per cent of GT Bank’s 2023 turnover, amounting to KES 33,180,000. It also ordered the refund of KSh13,211,285 and directed the bank to enhance staff sensitisation on Part VI of the Act.  

The bank has since appealed to the Competition Tribunal, arguing that the ruling does not adequately account for contractual terms and banking practice. The outcome will likely determine how firmly this decision reshapes lender-borrower relations.  

A Signal to the Banking Sector  

The dispute arrives at a moment of heightened strain in Kenya’s credit markets. Elevated interest rates and tighter liquidity have made facility renewals more frequent, more technical and, at times, more contentious. Banks are required to reassess collateral adequacy, accurately assess price risk, and protect their balance sheets. Yet the recent decision by the Competition Authority of Kenya makes clear that commercial prudence cannot be exercised without procedural clarity.  

Importantly, the Authority did not challenge a lender’s right to vary terms, reprice risk or enforce default clauses. What it scrutinised was the manner in which those adjustments were communicated and implemented. Variations presented as routine renewals, or default interest applied in a way that obscures a client’s true account position, may attract regulatory exposure under Sections 55 and 57 of the Competition Act. The emphasis, therefore, is not on restricting flexibility but on ensuring that changes are transparent, proportionate and free from misleading or coercive effect.  

For businesses, particularly mid-sized firms dependent on revolving credit, the ruling offers reassurance that regulatory recourse exists when negotiations appear imbalanced. For banks, it signals that compliance extends beyond contractual wording to broader standards of fairness embedded in competition law.  

The implications are operational. Renewal processes must be carefully documented, with clear distinctions drawn between extensions, restructurings and fresh offers. Risk-based adjustments should be demonstrably linked to legitimate commercial considerations and communicated with adequate notice. Default interest mechanisms, though permissible, must be precise in their trigger dates and calculation methods.  

In a high-interest environment where balance-sheet management is paramount, the reputational and financial risks of opaque communication are significant. If upheld on appeal, the decision may recalibrate the boundary between contractual autonomy and statutory oversight. The prudent response is not less flexibility, but disciplined transparency in how that flexibility is exercised.