The Competition Authority of Kenya (CAK) has imposed sanctions on Mogo, a Latvian-based lending firm, following an investigation into multiple customer complaints filed between May 2023 and April 2024. The company has been ordered to pay approximately Sh11 million in refunds and adjustments to borrowers affected by its allegedly deceptive practices.
The investigation revealed a pattern of misconduct in Mogo’s loan administration, primarily centered around currency manipulation and unilateral changes to loan terms. Four specific cases exemplify the issues raised by complainants:
In the first instance, a borrower who took a Sh2.1 million loan in June 2022 accused Mogo of altering the interest calculation method and computing interest in US dollars despite the loan being disbursed in Kenyan shillings. This practice exposed the borrower to unpredictable payments due to the Shilling dramatically losing its value in 2023.
Another case involved a Sh300,000 loan taken in July 2021. After 20 months of repayment, the borrower discovered an inflated balance of Sh392,000, again calculated in US dollars. The complainant ended up paying more than the contracted amount due to exchange rate volatility.
A third complaint concerned a Sh310,000 auto loan, where Mogo allegedly introduced dollar-based calculations after the agreement, claiming it was for “record-keeping purposes.” The lender also reportedly withheld the full loan agreement and introduced new terms not discussed during initial negotiations.
The fourth case detailed a Sh517,212 loan agreement from June 2022, where after seven months of repayment, the balance had grown to Sh726,000. The borrower alleged that Mogo had unilaterally changed the interest rate from a 2.5% flat rate to a 3.85% reducing balance rate, contradicting the original terms.
CAK’s investigation found Mogo in breach of the Competition Act, specifically clauses prohibiting false or misleading representations and unconscionable conduct in loan issuance and administration.
As part of the settlement, CAK has mandated several remedial actions:
1. The first complainant is to pay Mogo a final amount of Sh500,000 in four equal monthly installments.
2. Mogo must refund Sh108,745.1 to the second complainant, representing excess charges at the time of loan settlement.
3. The third and fourth complainants are to receive refunds of Sh80,915 and Sh155,279 respectively, reflecting the difference between the exchange rates applied and those in effect when the loans were issued.
Mogo is not alone in being accused of deceptive loan practices. Similar allegations have been levelled against others, but rarely do we see any action taken.
This ruling further highlights the need for borrowers to carefully scrutinize loan agreements and remain vigilant about their rights as consumers in the financial marketplace.
