NAIROBI, Kenya – The government is poised to take control over hire purchase rates and transactions involving movable property through the proposed Movable Property Security Rights (Amendment) Bill, 2024.
If adopted, the reforms will overhaul current regulations, placing tighter controls on businesses engaged in hire purchase agreements and modernizing how movable assets are used as collateral.
The Bill, now under review by the parliamentary finance committee, aims to simplify the licensing process for businesses involved in hire purchase while introducing new requirements.
One of the key changes is the expansion of the definition of hire purchase agreements, including scenarios where the purchase price is financed by a third party or the seller, bringing more transactions under regulatory oversight.
“If passed, this Bill will be a major step forward in regulating movable property transactions and hire purchase businesses, as all entities involved in hire purchase will need to be licensed,” said Sammy Ndolo, Managing Partner at Cliffe Dekker Hofmeyr Kenya.
While the new legislation seeks to tighten regulation and protect borrowers, it introduces additional administrative hurdles for businesses.
Companies involved in hire purchase agreements will face stricter compliance standards, although financial institutions already regulated by the Central Bank of Kenya (CBK) will be exempt from these new rules.
The Bill also addresses a significant legal gap. The CBK has acknowledged that the current laws do not allow it to regulate buy-now-pay-later schemes, leaving borrowers vulnerable to high interest rates and unfavorable repayment terms.
The proposed reforms will grant the CBK authority to set interest rates for hire purchase agreements, though it remains unclear whether these rates will be strictly capped or simply monitored.
Additionally, the Bill proposes repealing the outdated Hire Purchase Act, consolidating the legal framework around movable assets.
This will unify regulations, resolving inconsistencies with the Companies Act and other overlapping laws.
One contentious aspect of the Bill is the removal of restrictions on repossession. Under the current law, a court order is required if the borrower has paid two-thirds of the purchase price.
The new Bill eliminates this safeguard, allowing for repossession without judicial oversight.
The reforms also streamline the registration of charges created by companies, excluding book debts from registration requirements under the Companies Act, and grant borrowers the right to request the cancellation of security registration notices when they are no longer valid.
The Bill is expected to be debated in the coming months, with lawmakers weighing the balance between improving consumer protections and easing the burden on businesses.
If adopted, the reforms will overhaul current regulations, placing tighter controls on businesses engaged in hire purchase agreements and modernizing how movable assets are used as collateral.
The Bill, now under review by the parliamentary finance committee, aims to simplify the licensing process for businesses involved in hire purchase while introducing new requirements.
One of the key changes is the expansion of the definition of hire purchase agreements, including scenarios where the purchase price is financed by a third party or the seller, bringing more transactions under regulatory oversight.
“If passed, this Bill will be a major step forward in regulating movable property transactions and hire purchase businesses, as all entities involved in hire purchase will need to be licensed,” said Sammy Ndolo, Managing Partner at Cliffe Dekker Hofmeyr Kenya.
While the new legislation seeks to tighten regulation and protect borrowers, it introduces additional administrative hurdles for businesses.
Companies involved in hire purchase agreements will face stricter compliance standards, although financial institutions already regulated by the Central Bank of Kenya (CBK) will be exempt from these new rules.
The Bill also addresses a significant legal gap. The CBK has acknowledged that the current laws do not allow it to regulate buy-now-pay-later schemes, leaving borrowers vulnerable to high interest rates and unfavorable repayment terms.
The proposed reforms will grant the CBK authority to set interest rates for hire purchase agreements, though it remains unclear whether these rates will be strictly capped or simply monitored.
Additionally, the Bill proposes repealing the outdated Hire Purchase Act, consolidating the legal framework around movable assets.
This will unify regulations, resolving inconsistencies with the Companies Act and other overlapping laws.
One contentious aspect of the Bill is the removal of restrictions on repossession. Under the current law, a court order is required if the borrower has paid two-thirds of the purchase price.
The new Bill eliminates this safeguard, allowing for repossession without judicial oversight.
The reforms also streamline the registration of charges created by companies, excluding book debts from registration requirements under the Companies Act, and grant borrowers the right to request the cancellation of security registration notices when they are no longer valid.
The Bill is expected to be debated in the coming months, with lawmakers weighing the balance between improving consumer protections and easing the burden on businesses.
