Disclaimer:
The names and characters in this story have been altered to protect the privacy of the individuals involved. However, the events described are based on real cases handled by Tatua Center.

Unresolved financial disputes can become burdensome, resulting in frustration, ruined relationships, and financial misery. For Mamito Teddy, a protracted dispute with Modilu Bank over loan repayments created years of stress and hampered her ability to obtain credit. However, thanks to the intervention of Tatua Center, this complex dispute, which had gone on for over a decade, was settled amicably in just a few hours of mediation. This success story demonstrates the transforming impact of Alternative Dispute Resolution (ADR) in resolving financial disputes promptly, cost-effectively, and while sustaining relationships.

Modilu Bank provided Mrs. Teddy, a Tano Association employee at the time, a credit facility in 2006. She carefully maintained the debt for a year and paid a significant lump sum payment in the year 2007, just before leaving Tano Association. She soon joined Sita Services, and the bank provided her with a top-up loan. Mrs. Teddy continued to make payments, assuming that the top-up loan would be consolidated with the prior one and reimbursed by salary deductions under an agreement between her employer and the bank.

In 2011, Mamito quit Sita Services to start her own consultant firm. She defaulted on the debt while her firm was still in its early stages. A few months later, she continued paying in Ksh. 100,000 instalments, but inconsistently. However, she did not realize until much later that the two loans had not been merged and that the bank applied these payments at its discretion, further complicating her financial situation. To her dismay, her payments were only applied to the top-up loan, leaving the original loan with arrears and penalties for nonpayment. This error led to a considerable financial burden.

When Mamito attempted to apply for a loan from another bank in 2015, she was surprised to learn that she had been negatively listed with the Credit Reference Bureau. The negative listing severely limited her ability to obtain finance for her firm. Mrs. Teddy, frustrated with Modilu Bank’s handling of her accounts, refused to make any further payments until she obtained a reconciled statement. Despite her numerous attempts to meet with the bank and obtain clarification on her payments, the bank did not provide sufficient answers.

Mrs. Teddy addressed the Lenders Association in January 2020, after years of frustrating back-and-forth with the bank, and they advised her to refer the problem to Tatua Center for mediation. Tatua Center, an ADR Center whose objective is to improve business by efficiently managing disputes in the financial sector, was the ideal choice to assist Mrs. Teddy in resolving her long-standing issue with the bank.

Tatua Center’s role in facilitating resolution

Article 159 (2)(c) of the Constitution of Kenya 2010, encourages courts to promote Alternative Dispute Resolution (ADR) mechanisms such as mediation and arbitration. According to Section 29(2)(f) of the CRB Regulations, 2020, clients can refer their issues to ADR if they are unhappy with the resolution method provided by their financial institution. ADR provides a more consensual, cost-effective, and speedy solution than the lengthy and expensive court litigation processes.

Tatua Center’s approach to ADR is based on encouraging productive communication and facilitating parties to reach mutual agreements. In March 2020, a mediation session between Mrs. Teddy and Modilu Bank was scheduled at the Center. The session, led by a neutral Judiciary-accredited mediator, allowed both parties to express their concerns and review their positions.

Mediation process and outcome

During the mediation, it became clear that the main issue was the bank’s failure to consolidate loans and provide clarity on account balances. Mrs. Teddy produced evidence of payments she had made over the years, and Modilu Bank admitted to some errors in how her accounts were handled.

After two and a half hours of good negotiation, the parties reached a settlement agreement. The mediation procedure allowed for open conversation while considering both sides’ needs and interests. Mrs. Teddy consented to a revised payment schedule, and the bank promised to clear her negative listing with the CRB.

Importantly, both parties departed the mediation room with renewed trust and commitment. Mamito Teddy’s business reputation was restored, and Modilu Bank pledged to continue its business relationship with her.

Why mediation matters in financial disputes

The successful resolution of the disagreement between Mamito Teddy and Modilu Bank demonstrates the efficacy of mediation as a dispute resolution method, especially in the financial industry. Mediation offers numerous key benefits:

1. Cost-effective: When compared to litigation, mediation is far less expensive, eliminating the high legal fees involved with court proceedings.
2. Timely: Disputes that could last years in court can be addressed in a matter of hours or days with mediation. Mrs. Teddy’s case was settled in less than three hours.
3. Confidential: Unlike public court proceedings, mediation is a discreet process that preserves the parties’ privacy and helps them maintain their reputation.
4. Maintains relationships: Mediation focuses on finding solutions that benefit all parties, ensuring that business relationships are not jeopardized in the process. In this circumstance, Mrs. Teddy’s relationship with Modilu Bank was repaired.
5. Flexible and Consensual: Parties determine the outcome of the mediation, and agreements are established through mutual consent rather than court-imposed rulings.

Tatua Center is your partner for resolving financial disputes.

Tatua Center is committed to improving business operations by providing efficient, amicable, and effective dispute resolution processes for the financial sector. Individuals, MSEs, and corporations dealing with complex financial conflicts can rely on our services, which include mediation, debt negotiation, debt restructuring, debt consolidation and debt counseling.

The case of Mamito Teddy and Modilu Bank demonstrates the effectiveness of mediation in settling credit disputes without the need for costly litigation. Tatua Center can assist you if you are a financial institution looking to resolve disputes with your clients, a business owner, or an individual experiencing financial difficulties. Contact us today by lodging a dispute here

Let us work together to resolve disputes in a conducive manner, karibu Tatua!