Key Highlights of proposed Hire Purchase (Amendment) Bill, 2021
The Bill proposes to amend the Hire Purchase Act (CAP 507 – Act No. 42 of 1968, Laws of Kenya). This Act currently regulates all hire-purchase agreements where the hire purchase price does not exceed the sum of Kenya Shillings Four Million (Kshs.4,000,000). The Bill proposes to amend the definition to hire purchase agreement to be as follows:-
Hire Purchase Agreement:
agreements whereby, an owner of goods allows a person, known as the hirer, to hire goods from him or her for a period of time by paying instalments. The hirer has an option to buy the goods at the end of the Agreement if all instalments are being paid. However, it is not a contract of sale but contract of bailment as the hirer merely has an option to buy the goods and although the hirer has the right of using the goods, he is not the legal owner during the term of the agreement, the ownership of the goods remains with the owner.
the total sum payable by the hirer under a hire purchase agreement in order to complete the purchase of goods to which the agreement relates, exclusive of any sum payable as penalty, compensation or damages for a breach of the agreement
Key amendments to the Act include:-
- Removing requirement to register Hire Purchase Agreements: The proposes to delete Section 5 of the Act which requires all Agreements to be registered with the registrar within thirty days after execution. This corrects the mischief where Hire Purchase Agreement were declared not to be enforceable simply because they had not been registered in time.
- New Requirements relating to Hire Purchase agreements: The bill requires the following information to be included in a Hire Purchase Agreement:
- The statement of cash price
- Hire Purchase price
- Amount of instalments
- Description of goods
- Notice relating to rights of hirer
- Applicable interest rate
- Total interest
- Processing fees
- Other applicable fees; eg insurance, additional charges for assignment of interest to new owners
- Revision of penalties: The Bill amends Section 8 of the Act by adding a new sub-section 5 which states that anyone who contravenes Conditions and warranties implied in Hire Purchase agreement commits an offence and shall on conviction, be liable to a fine not exceeding three million shillings or imprisonment for a term not exceeding three years or, to both. If the Hirer removes or permit the removal of the goods from Kenya without the written consent of the owner the penalty has been increased from ten thousand to one million.
- Offence to give misleading or false information in HPA: The Bill amend the act to provide that a person who knowingly gives false information in any proposal form or other document completed for the purpose of entering into a hire-purchase agreement commits an offence and shall on conviction be liable to a fine not exceeding one hundred thousand shillings or to imprisonment for a term of three years, or to both.
- Use of email address: Section 9 allows the owner of goods to include and use his email address in the agreement and when he/she want to change address. The principal act only allowed the use of only the postal, residential and business addresses in the agreement.
- Introductions of new Part on repossession by the owner: A new’ ‘Part VA” is added immediately after ”PART V of Section 12 it requires the owner to issue a notice on repossession. This Notice should stipulate the fixed period for repossession after which the Owner has the right to reposes the goods after the expiry of the notice which shall not be less than 7 days after the service of the notice. The issuance of Notice is an enforcement of the constitutional rights as stipulated in Article 46 (1) provides that consumers have the right to the information necessary for them to gain full benefit from goods and services and also to compensation for loss or injury arising from defects in goods or services. The Principal Act didn’t not require the owner to issue a Notice or a demand letter to the hirer before repossession of goods as held in the case of Athman Mustafa Mohammed v Ecobank Kenya Limited & 2 others  eKLR where the court held that repossession of a motor vehicle without notice was legal as the only interest which defendant had in the vehicle was that it was the security for the financial facility which the bank gave to plaintiff.
- Reduction of threshold set for recovery of possession of goods: The Principal Act stipulates that, if at any time 2/3 of the hire purchase price has been paid by the hirer or any other person on his behalf, the owner cannot repossess the goods otherwise than by court action. It is specific that under such circumstances, the owner of the goods shall not enforce any right to recover possession of the goods from the hirer other than by a suit as held by the High Court in Civil Appeal No 24 of 2013 David Karobia Kiiru v Laverage Company Ltd  eKLR. This threshold has now been reduced from 2/3 to any price that has been paid and is more than half of the total H.P. price.
Writer: Mugure Kinuthia,
Associate – Dispute Resolution and Regulatory Compliance
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