The term “In Duplum” comes from Latin meaning “in double”. This rule may sound mystical but it is a legal shield that prevents interest on non-performing loans from exceeding the maximum loan amount. This limitation aims to prevent excessive interest accumulation and protect borrowers from undue financial strain. Simple right? but it has its twists.

In Kenya, the In Duplum Rule is provided under Section 44A of the Banking Act, which states that a lender is limited in what it may recover from a debtor with a non-performing loan. The maximum amount includes the principal amount, accrued interest not exceeding the principal owing when the loan becomes non-performing, and any recovery-related expenses incurred by the lender.

In this case, if the lender intends to charge you interest more than the maximum amount as specified above for a non-performing loan the law says, “Hold on a minute, that’s enough!”

What is a non- performing loan?

A non-performing loan (NPL) is a loan in which the debtor has failed to make scheduled payments of the principal or interest, for a specified period, typically 90 days or more. Essentially, it is a loan that is no longer generating income for the lender.

Application of the In Duplum Rule.

The In Duplum Rule is designed to protect borrowers but it is not a loophole. It only applies to non-performing loans, so if you are paying your monthly loan installments on time the interest will accumulate normally. Additionally, lenders are permitted to impose other charges or penalties not covered under the In Duplum Rule.

Scope of application of the In Duplum Rule.

The High Court in Petition No. E002 of 2021- Anne J. Mugure & 2 Others v Higher Education Loans Board, declared that the In Duplum rule applies to all persons involved in the lending business. However, in a more recent case Momentum Credit Limited v. Kabuiya (Civil Appeal E035 of 2022), the High Court clarified that for Section 44A of the Banking Act to apply, Momentum Credit Limited must be a bank or financial institution as defined by the Act. Thus, the Court determined that Momentum Credit Limited did not fall under Section 44 of the Banking Act because it was not a deposit-taking institution.

Conclusion: 

The In Duplum Rule is an important legal safeguard that can make a big difference when stuck with a non-performing loan. Also, it is important to review the fine print before signing any loan agreements and to seek legal advice to fully understand how this rule applies.

Please contact us at info@cfllegal.com should you require further information.