The CFC Stanbic Bank branch along Kimathi Street in Nairobi.
A Nairobi-based mobile phone services dealer has sued Stanbic Bank Kenya on claims that the company’s details were used by unknown people to open an account without its knowledge or consent and a Sh7 million loan taken by the “fictitious” client.
California Link Services Communication Limited says in court filings that it did not have any dealings with Stanbic Bank and was surprised when its accounts at telecommunications company Safaricom PLC were attached for recovery of a loan. The company alleges that it did not open an account with the bank and did not apply for the credit facility. The company deals with Safaricom PLC for the sale of airtime, phones, accessories and provision of M-Pesa mobile money services.
But the bank has denied the allegations of fraud and an unauthorised loan, stating that there is no evidence to support the claims raised by the M-Pesa dealer.
In its grounds of opposition to the dispute filed at the Milimani magistrate’s commercial court in Nairobi, the bank has also said the company filed a complaint to the Banking Fraud Investigation Unit and the matter is pending resolution.
“No adverse findings have been made against the bank. The application in court is therefore premature, speculative and an improper attempt to bypass regulatory oversight in favour of unnecessary litigation,” says the financial lender in court papers.
Regarding the deductions made in the dealer’s account at Safaricom, the bank says they “were made in accordance with the contractual terms voluntarily agreed to by Link Services Communication Limited and no evidence has been adduced to demonstrate a breach or misrepresentation”.
Court papers indicate that the company learnt of the existence of the bank account in March 2024 after being listed in the Credit Reference Bureau (CRB) over non-payment of a loan.
It was aggrieved that the bank engaged auctioneers in June 2024 to recover the loan of Sh7,080,765 and which had increased to Sh7,118,986 due to interest.
“The credit facilities accruing interest to a total of Sh7,118,986 were listed by Stanbic Bank on the Credit Reference Bureau (CRB) on February 27, 2024 for non-payment, despite the company (California Link Services Communication Ltd) not being aware of the existence of the credit facilities and never consenting to or receiving any benefit from the said funds,” it says in the court papers.
Through its director Mr Ali Abdullahi Isaac, the company says that sometime in March 2024, they were alerted of deductions done on their business account at Safaricom. He said that upon following up, he was informed that the company had taken a loan with the lender, which needed to be repaid.
Lawyer Abdullahi Khalif argued that the company had nothing to do with the loan. He further said that his client had not opened or authorised any documents to open the account that was used to take the loan.
“Stanbic Bank reported fictitious loan arrears to Safaricom PLC, leading to unwarranted suspension of the company’s account and unwarranted suspension of its essential M-Pesa working account. As a result of which its business operations were severely disrupted, causing significant financial loss and reputation damage,” said Mr Khalif.
The lawyer said that Stanbic went ahead to list his client as a defaulter with the CRB despite him being unaware of it. He said that Mr Abdullahi immediately raised concern with the bank but he did not get a solution.
“Despite repeated assurances by the bank that investigations were underway, no tangible action has been taken to address the plaintiff’s grievances or rectify the defendant’s unlawful actions,” said Mr Khalif.
He asserted that his client was not aware of the borrowed money and did not benefit from it, adding that he also sought the intervention of the Central Bank of Kenya (CBK) but the dispute remains unresolved.
“The bank’s actions have caused the company to suffer financial loss, reputational damage and severe emotional distress. The bank accepted and processed forged documents in breach of its legal obligation to conduct proper due diligence before opening the account,” the lawyer said.
In his supporting affidavit, Mr Abdullahi, the company director, said that the bank had already deducted Sh1.1 million by January 2025 towards the recovery of the disputed loan. He stated that the alleged loan strained the relationship between his company and Safaricom.
“The suspension of the company’s M-Pesa working account, triggered by the defendant’s report of fictitious loan arrears, has not only disrupted the company’s operations but had also raised questions about its credibility with Safaricom and other stakeholders,” said Mr Abdullahi.
He stated that the bank breached its duty by allowing another person to run an account in the name of the company, issue a loan without verification and subsequently going after him.
“The bank’s actions have caused irreparable harm to the company, including financial losses, operational disruptions, reputational damage and emotional distress,” he said.
Mr Abdullahi urged the court to find that the bank had breached its duty. He wants the court to compel the bank to refund the amount it had already deducted and a compensation order issued for loss of business.
The case is pending determination before principal magistrate Stephen Onjoro with the next court appearance scheduled for April 2, 2025.
The magistrate has since issued a temporary order stopping the bank from making further deductions or interception of the company’s commission payable by Safaricom.
