AG blocks Bill shielding loan guarantors

Parliament has defied Attorney-General Kihara Kariuki’s directive to delay a Bill that will compel creditors to seize assets of defaulting borrowers before touching a guarantor’s property.

Leader of Majority Aden Duale told MPs that he had turned down Mr Kihara’s request that debate on the Law of Contract (Amendment) Bill, 2019 be deferred.

“I have received a letter from the AG saying that we wait for more instructions. I want to tell Attorney-General that the legislative work of this House cannot be stopped.

“If you have issues as government, you need to bring amendments to this private members Bill and not ask this House to step down the Bill,” said Mr Duale while initiating debate on the Bill on behalf of the sponsor, Juja MP Francis Waititu.

He did not disclose exact reasons as to why Mr Kihara wants the Bill withdrawn.

Mr Waititu seeks to amend Section 3 of the Law of Contract Act that lays rules for signing of such agreements.

Mr Duale said the amendment to the Law of Contract Act will ensure that the assets of a guarantor is protected.

“The law currently allows the assets of the guarantor to be taken in case of default by the principal borrower. We are saying that before you go for the guarantor, you must realise all the assets of the principal borrower,” said the Garissa Township MP.

“You can only go for assets of the guarantor once the assets of the borrower has been exhausted and the loan taken has not been cleared.”

MPs unanimously supported proposed legislation, which the Justice and Legal Affairs Committee backed with a minor amendment to restrict the application of the law to contracts signed after the date the Bill becomes law.

The Bill seeks to end the current case where creditors see guarantors as hanging fruits in their bid to collect bad loans.