Co-op Bank loses appeal over car sold after customer said arrears were cleared

Peter Musya Kiteme said he had paid off his car-loan arrears, along with auctioneer and storage charges. His bank nevertheless kept the Toyota Harrier and sold it months later. Now Kenya’s Court of Appeal has rejected Co-operative Bank of Kenya’s challenge to a compensation award, according to Capital FM Kenya Business (direct).

The three-judge bench upheld the High Court’s decision in Kiteme’s favour. In its ruling, the appeal court confirmed an award of KSh1,777,541.28, together with exemplary damages, interest and costs. Exemplary damages are an additional payment imposed to penalise wrongful conduct. The report separately identifies that payment as KSh300,000 and describes the underlying award as KSh1.8 million, subject to specified deductions.

A financed car, then a disputed repossession

The dispute began with Kiteme’s purchase of a Toyota Harrier valued at KSh2.95 million. He put down KSh718,000, while the bank financed the rest through an asset-finance and hire-purchase arrangement—a way to acquire a vehicle through scheduled payments. The agreement called for 48 monthly instalments of about KSh60,434, setting out the payments he was expected to make over the life of the financing.

The bank took possession of the vehicle in May 2021, saying Kiteme owed KSh455,029 in overdue payments, according to court documents cited in the report. Kiteme sought legal intervention. His position was that, by June 15, 2021, he had settled the outstanding amount and paid the auctioneer and storage charges as well. Those payments did not bring the vehicle back to him.

Instead, the bank retained the car and sold it in September 2021 for KSh1.52 million. The dispute therefore went beyond whether instalments had fallen overdue. It also raised the question of whether the bank could repossess or sell the vehicle at all without first obtaining court permission, given how much Kiteme had already paid under the financing agreement.

The two-thirds safeguard

At the heart of the case was Section 20 of Kenya’s Consumer Protection Act. For agreements involving obligations to be completed in the future, the provision restricts a supplier’s ability to repossess or dispose of goods once the consumer has paid at least two-thirds of the payment obligation. At that point, the supplier must obtain permission from the High Court before taking those steps. The court found that Kiteme’s payments had already passed that threshold.

The bank argued that the Consumer Protection Act did not apply because the transaction fell under the Hire Purchase Act. The Court of Appeal rejected that argument and found no basis to overturn the High Court’s decision. It also ordered the bank to pay Kiteme’s costs of the appeal.

The appeal had no merit, and the compensation, exemplary damages, interest and costs would stand, the Court of Appeal said.

The outcome leaves the compensation order intact after the bank’s unsuccessful challenge. The point to watch in the award’s implementation is the combination of the upheld sum, exemplary damages, interest and costs. The report does not give a payment timetable or say whether the bank plans any further legal action.