July 18, 2024

KCB Reaches Agreement with Competition Authority Over Misleading Credit Card Advertisement

KCB Reaches Agreement with Competition Authority Over Misleading Credit Card Advertisement

The Competition Authority of Kenya (CAK) has reached a settlement with KCB Bank Kenya following a complaint lodged by a customer who was misled by the bank’s credit card advertisement. The issue stemmed from a discrepancy between the advertised benefits and the actual terms of the KCB Platinum Credit Card.

According to a CAK report, KCB advertised a 45-day interest-free period for Platinum Credit Card holders. However, a customer, Mr. Anthony Nderitu, was charged interest despite expecting the grace period to apply. Further confusion arose due to a lack of clear communication regarding repayment cycles and credit billing.

Mr. Nderitu borrowed Sh240,000 through his KCB Platinum Credit Card, which was subjected to a six percent interest charge upfront. The bank’s website advertised a 45-day interest-free period, leading Mr. Nderitu to believe this grace period would end on April 30th, 2022. He settled the entire amount due (Sh254,602) on April 23rd, 2022, including the upfront interest on the cash advance.

Upon reviewing his credit card statement, Mr. Nderitu discovered unexpected charges totaling Sh21,581. This included a late payment interest of Sh12,724 and a debit interest of Sh8,857. When Mr. Nderitu inquired about these charges, he was informed that credit card billing occurs on the 15th of every month, with payment due by the 30th. His failure to make a payment by March 30th, 2022, resulted in the late payment fee and additional interest.

“Information on the bank’s website indicated that Platinum Credit Card holders were entitled to a 45- day interest-free period. Therefore, the complainant expected this period to lapse on 30th April, 2022. On 23rd April, 2022, the complaint settled the full amount due (Sh254,602), inclusive of the aforementioned six percent cash advance interest. Upon interrogating the statement of the credit card, the complainant discovered the bank had charged a late payment interest of Sh12,724 and a debit interest of Sh8,857, totaling Sh21,581,” CAK notes in its report.

The crux of the issue was that Mr. Nderitu, like many borrowers, was not adequately informed about the billing and repayment cycles beforehand. CAK’s investigation revealed that KCB’s lack of full disclosure regarding loan terms led customers to incur unforeseen charges.

“The complainant had not been informed of the billing and repayment cycles beforehand,” CAK noted.

This incident highlights a broader trend of unfair practices within the banking sector. Notably, in a comparable situation, Stanbic Bank had to reimburse a customer, Mr. Phillip Manje, Sh7,282 for excess interest charged on his credit card for an outstanding amount of Sh811.

Similarly, Family Bank had to refund a former employee Sh1.4 million in relation to a mortgage loan. The bank had promised her a 20 percent waiver on the loan even after she left employment in 2015, but later retracted this promise and charged the amount when she was unable to make the agreed payments for a period of time.

Other banks facing similar ongoing investigations from the Competition Authority of Kenya include NCBA Bank, DIB Bank and Faulu Bank.