The Court of Appeal in Kenya has reinstated Credit Reference Bureau (CRB) Regulations, which were nullified by the High Court last year, giving the Central Bank of Kenya the authority to regulate entities that help lenders to assess data of borrowers.
The Banking (Credit Reference Bureau) Regulations 2020 were declared null and void by Justice Mugure Thande on August 28, 2023 for noncompliance with Section 11 of the Statutory Instruments Act, on timelines.
CBK moved to the Court of Appeal contending that the credit information sharing framework had been thrown into disarray as the regulator cannot enforce or implement the regulations.
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The court was informed that whereas the regulations were published by CBK on April 8, 2020, they were transmitted to the Clerk of the National Assembly on May 5, 2020.
The regulations ought to have been transmitted by April 14, 2020, the petitioner Benjamin Bogongo argued. The High Court judge had rejected an excuse of Covid-19 pandemic, as submitted by Cabinet Secretary for Treasury for the cause of the delay.
A bench of three judges of the Court of Appeal agreed with the CBK and Treasury that the quashing of the regulations had left a vacuum in regulation of CRBs in Kenya.
The banks’ regulator had submitted that the absence of the regulations was hindering the discharge of its constitutional mandate, which requires it to maintain a stable and efficient banking and financial system in Kenya.
Justices Asike-Makhandia, Mumbi Ngugi and Mwaniki Gachoka ruled that the CBK and the public would suffer irreparable harm in light of the lacuna that has been left by the nullification and the appeal, which has already been filed, would be rendered nugatory in the event that it succeeds.
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“We accordingly allow the application and grant an order that the declaration issued by the High Court that the Banking (Credit Reference Bureau) Regulations 2020 are null and void for non-compliance with section 11 of the Statutory Instruments Act 2013 be and is hereby suspended pending the hearing and determination of the applicant’s appeal,” the judges said.
The judges noted that the nullification of the CRB Regulations 2020 meant that there was no longer a regulatory regime in place.
The CBK submitted that three key areas had necessitated the review of the CRB Regulations 2013— the minimum threshold for negative credit sharing information submitted to CRBs, granting of CRB clearance to first time job applicants seeking employment in public and private entities and onboarding of other financial services sector players including Saccos regulated by the Sacco Societies Regulatory Authority into the Credit Information Sharing framework.
The regulator submitted that its appeal is arguable and raises several issues of law meriting input from the court, among them the submission that the trial judge failed to appreciate the constitutional architecture for Parliamentary scrutiny of subsidiary legislation.
