The government is set to overhaul the regulation of movable property security with the Movable Property Security Rights (Amendment) Bill, 2024, aiming to modernise and unify existing laws while addressing the complexity and lack of consumer protection in the outdated Hire Purchase Act.
Among the proposed changes, the Central Bank of Kenya (CBK) will gain authority to set interest rates for hire purchase agreements. According to Sammy Ndolo, Managing Partner at law firm Cliffe Dekker Hofmeyr (CDH) Kenya, “This could complicate and potentially reduce the attractiveness of hire purchase deals.”
The shift also raises concerns that it could deter consumers from utilising hire purchase options, which are often vital for individuals and small businesses seeking to acquire essential goods.
The Bill also expands the definition of hire purchase agreements to include transactions where the purchase price is financed by the seller or a third party.
Streamline regulations
“All entities involved in hire purchase will be required to obtain licenses, which could streamline regulations but may also introduce bureaucratic challenges for businesses, Ndolo said.
While the aim is to simplify the licensing process, he explained that “this may also lead to increased administrative work,” particularly for smaller enterprises.
Another significant change pertains to repossession procedures. Under the current Hire Purchase Act, a court order is required for repossession if more than two-thirds of the purchase price has been paid.
However, the new Bill allows for easier repossession of goods without such a requirement, raising concerns about consumer rights and protections. Ndolo noted that “the Bill does not include similar restrictions,” which could lead to potential abuses in repossession practices.
The Bill also seeks to enhance consumer protection measures by addressing exploitative practices in the hire purchase sector. This is particularly relevant for vulnerable groups, such as boda boda operators, who often face exorbitant fees and hidden costs associated with hire purchase agreements.
Additionally, the Bill clarifies registration requirements for charges created by companies and allows borrowers to request the cancellation of security registration notices if their security rights are no longer valid. This provision aims to tackle issues related to administrative delays and lost credentials that have plagued secured creditors.
“If approved, this Bill will mark a significant shift in how movable property transactions are regulated in Kenya, potentially bringing both new opportunities and challenges for businesses,” Ndolo said.
The Bill is currently under review by the Parliamentary Committee on Finance and is expected to be debated in the coming months. If passed, these reforms could significantly alter how Kenyans engage with movable property transactions, enhancing transparency while also presenting new challenges for both consumers and businesses alike
