Platinum Credit sold the car of a borrower who had cleared his loan. It’s been ordered to pay him Shs 25 million

Platinum Credit Uganda, a prominent microfinance institution, has been ordered to compensate Fred Wafula, a borrower, Shs 25 million after it wrongfully impounded and sold his car, yet he had cleared his loan.

The ruling by Justice Bernard Namanya overturned the earlier decision of the Chief Magistrate’s Court, which had dismissed Wafula’s case for supposedly lacking evidence.

Namanya discovered that the magistrate had been wrong to disregard Wafula’s complaint and wrong to conclude that his pleadings did not disclose a proper case.

The dispute began in February 2021 when Wafula applied for what he believed was a loan of Shs 2.3 million through Platinum Credit’s online loan system. In June of the same year, he was informed that he had fallen into arrears amounting to Shs 864,242 and was told to clear the amount within three days.

Shortly afterwards, on June 18, 2021, Platinum Credit impounded his car, a Toyota Wish registration No. UBH 079K. The car was later auctioned even though the matter had already been taken to court.

Wafula insisted that he had taken two loans from Platinum Credit, the first being Shs 7.9 million and the second being Shs 2.3 million, which he had fully repaid. He submitted bank receipts to show he had paid a total of Shs 4.9 million towards the second loan, which he believed cleared his obligation.

He argued that there was no justification at all for the seizure of his vehicle and that his property had been sold illegally.

Platinum Credit disagreed. It argued that Wafula had actually taken a much larger second loan of Shs 6.89 million, that he had defaulted on this loan, and that the company therefore acted lawfully in impounding the car. The company insisted that Wafula had applied for the larger loan using its USSD mobile loan platform and that the loan was processed electronically.

To support its argument, Platinum Credit relied on an audio recording of a telephone call, which it said captured Wafula applying for the loan. Its witnesses also said the company required borrowers who used the USSD system to leave post-dated cheques as security for repayment, although none of these cheques were presented in court.

MTN deactivated simcard of Sarah Opendi’s husband. He sued and was awarded Shs 5 million

In his ruling, Justice Namanya rejected most of Platinum’s evidence. He noted that the lender failed to produce even a single document confirming the alleged second loan of Shs 6.89 million taken by Wafula.

The judge pointed out that the Moneylenders Act requires lenders to keep proper records and to issue receipts immediately after each customer payment. He concluded that Platinum Credit had “failed to adduce evidence” to prove the loan existed at all.

The judge was equally critical of the audio recording, which Platinum Credit had relied on as a key piece of its argument. After listening to the recording, he wrote that its authenticity had not been established.

“There is no transcript of the audio recording, and the date of the audio recording is not indicated,” Namanya said, adding that the people heard on the recording could not be properly identified.

He concluded that the recording was “inadmissible” and that there was “no evidence that the respondent advanced a second loan facility of Shs 6.89 million.

Justice Namanya also questioned why Platinum Credit insisted that Wafula owed only Shs 864,242 shortly before the impounding, yet the company later auctioned the car for Shs 9 million and gave no account of what happened to the remaining Shs 8.1 million.

He wrote: “How come the respondent auctioned the appellant’s motor vehicle at Shs 9 million and did not account for the difference of Shs 8.1 million? He said the sale of the vehicle in March 2022 took place months after Wafula had already filed his case in August 2021, which he described as a “fraudulent act.”

Because Platinum Credit failed to prove the existence of the larger loan and failed to provide proper records, the court accepted Wafula’s version of events.

Justice Namanya said he believed Wafula had fully repaid both loans. He ruled that Platinum Credit had violated the law regulating moneylenders and that it had also breached requirements under the Security Interest in Movable Property Act by auctioning a pledged vehicle without proper accounting.

The court ordered Platinum Credit to pay Wafula Shs 14 million, the open market value of the vehicle, plus Shs 11 million in general damages. It also ordered the lender to pay interest of 25 per cent per year on the entire award until full payment, as well as costs of both the appeal and the original case.

For a Ugandan planning to borrow money from a financial institution, the ruling means that lenders cannot lawfully seize and sell your property without strictly following the law.