BANK LOANS – INTEREST RATES ADJUSTMENTS
By Dickson Jere
A miner got a personal loan of K108,000 from Stanbic Bank Zambia. This was after the bank signed an MOU with Lumwana Mine to allow its workers access loans from Stanbic. The loan was to be repaid within 60 months with an interest rate of 21% per annum.
All was well until after 26 months of prepaying the loan, he discovered from his pay-slips that monthly installments which was K3,077.56 had slightly gone up to K3,733.94. He sincerely believed the interest of 21% was fixed and therefore thought the bank had shortchanged him.
He sued in the High Court demanding for damages for breach of loan agreement as well as refund of all monies deducted “illegally” from him. He also wanted the bank to render an account of all interest charged above 21% per annum.
However, the bank argued that interest rates changes were subject to Bank of Zambia (BOZ) policy rate and that Stanbic reserved the right to vary the interest rates. The bank insisted that the loan agreement had in fact the conditions that allowed adjustment and the miner signed the document in agreement.
The High Court sat at Solwezi and made the following determinations after hearing from both sides.
“I must hasten to state here that it is trite law that when parties willingly enter into an agreement, they are bound by the terms and conditions of the said agreement,” said Judge Mulenga.
He then determined that the having obtained a fixed term loan, the interest rate, monthly deductions and tenure of the loan cannot remain constant. In fact, it fluctuated between 21% to 40% during the loan period.
“The reason is simple, the interest rate which is determined by BOZ policy rate as agreed by the parties…was adjusted upwards and downwards several times thereby affecting the said loan,” the Judge said.
The Court further dismissed all other claims.
“I, therefore, find and hold that the Plaintiff (miner) has failed to prove on balance of probabilities his claim that the Defendant (bank) illegally deducted money which should be refunded,” the Court ruled.
At the time of the case, the loan was fully paid.
This is an important case to borrowers to always pay attention to all the terms and conditions in loan agreements before signing so that you understand. If in doubt, seek legal advice on the clauses especially on interest.
Case citation – Andrew Chirwa v Standard Bank Zambia Limited – 2019/HV/26 and Judgement delivered on 23rd May, 2023.