A mobile services dealer based in Nairobi has dragged Stanbic Bank Kenya to court, accusing the lender of facilitating a fraudulent Sh7 million loan that has now crippled its business.

California Link Services Communication Limited, which trades in airtime, phones, accessories, and M-Pesa services in partnership with Safaricom PLC, claims that an unknown party opened an account in its name at Stanbic and secured a Sh7 million loan—without its knowledge or consent.

The company insists it never interacted with the bank, let alone requested a credit facility, and was blindsided when deductions began surfacing in its Safaricom account.

The dispute came to light in March 2024 when the company discovered it had been blacklisted by the Credit Reference Bureau (CRB) over unpaid debt.

Court documents reveal that Stanbic had engaged auctioneers by June 2024 to recover the loan, which had accrued interest, pushing the outstanding amount to Sh7,118,986.

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"The credit facilities accruing interest to a total of Sh7,118,986 were listed by Stanbic Bank on the Credit Reference Bureau (CRB) on February 27, 2024 for non-payment, despite the company (California Link Services Communication Ltd) not being aware of the existence of the credit facilities and never consenting to or receiving any benefit from the said funds," the court papers state.

Company director Ali Abdullahi Isaac says he first noticed trouble when unexpected deductions hit the firm’s Safaricom account. When he sought clarification, he was shocked to learn the company had supposedly taken out a loan—one it never applied for.

His lawyer, Abdullahi Khalif, argues that the bank’s actions have thrown the business into turmoil.

"Stanbic Bank reported fictitious loan arrears to Safaricom PLC, leading to unwarranted suspension of the company's account and unwarranted suspension of its essential M-Pesa working account. As a result of which its business operations were severely disrupted, causing significant financial loss and reputation damage," he states.

The company further alleges that despite raising concerns with the bank, no corrective action has been taken.

"Despite repeated assurances by the bank that investigations were underway, no tangible action has been taken to address the plaintiff's grievances or rectify the defendant's unlawful actions," Khalif adds.

Stanbic Bank, however, denies any wrongdoing. In its court filings, the lender dismisses the allegations as unfounded, stating that there is no proof of fraud.

It maintains that the deductions were legitimate, arguing, "The deductions were made in accordance with the contractual terms voluntarily agreed to by Link Services Communication Limited and no evidence has been adduced to demonstrate a breach or misrepresentation."

The bank also points out that the matter is already under review by the Banking Fraud Investigation Unit, asserting, "No adverse findings have been made against the bank. The application in court is therefore premature, speculative and an improper attempt to bypass regulatory oversight in favour of unnecessary litigation."

Despite the ongoing legal tussle, the company claims it has already suffered significant financial setbacks.

Abdullahi says the bank had deducted Sh1 million from its account by January 2025 in an attempt to recover the contested loan.

The alleged loan, he argues, has also damaged the company’s standing with Safaricom.

"The suspension of the company's M-Pesa working account, triggered by the defendant's report of fictitious loan arrears, has not only disrupted the company's operations but had also raised questions about its credibility with Safaricom and other stakeholders," he states.

In its suit, California Link Services seeks a declaration that Stanbic breached its duty by allowing an unauthorised account to be opened in its name, approving a loan without due diligence, and pursuing repayment from an entity that never borrowed the money.

The company demands a refund of the deducted funds and compensation for financial losses incurred.

The case is now before Principal Magistrate Stephen Onjoro, who has issued a temporary order stopping the bank from making further deductions or intercepting the company’s Safaricom commissions.

The matter is scheduled for mention on April 2, 2025.