Commercial banks are planning to set up a dispute resolution office that will review cases and try to make out-of-court settlements with their clients to help cut legal fees.
The Kenya Bankers’ Association Chief Executive Officer, Habil Olaka, said that the arbitration mechanism will reduce the number of court cases between the banks and their clients. This system is also likely to reduce the time and costs involved when banks and customers settle their disputes through courts.
Mr. Olaka who was speaking at the launch of ‘Consumer Guide to Banking in Kenya’ handbook said that a normal court case would take about 3 years or more to be settled, involving huge costs to the consumer as well as the bank. If there was a mechanism where the number of cases that are settled in courts can be reduced, the bank and the consumer can save a lot of money.
The arbitration mechanism, which is likely to be set up in early 2013, will have a process that will empower commercial bank staff with the capacity to handle such disputes internally. In the event of failure, the matter can be forwarded to the arbitration team that the banking industry is setting up.
At present, many customers and even banks approach courts even when the disputes could be resolved sooner and easily.
Mr. Olaka said that some of these disputes arose because of the non-exchange of the right information between the banks and the customers. He said that efforts are being made to reduce the time-frame to resolve disputes between the bank and the consumer.
The most common areas of dispute were due to the banks’ listing of credit information of their clients, signing contracts or agreements without full disclosure of the conditions, account operation issues, and banks’ terms and conditions.
Martin Oduor-Otieno, Chief Executive Officer, Kenya Commercial Bank hoped that the alternative dispute resolution mechanism will bridge the prevailing gap. He said that it would be a good starting point for the entire industry even as banks are developing internal mechanisms of dealing with clients.
All the banks have also agreed to be more open and transparent in their dealings as customers have become more aware of their rights.