Mogo Auto Limited fined Sh10.85m for manipulating loan terms
Fraud illustration. File photo
The Competition Authority of Kenya (CAK) has imposed a fine of Sh10.85 million on Mogo Auto Limited, a financial services provider, for misleading representations and unconscionable conduct against its customers.
The penalty follows an investigation prompted by multiple customer complaints that revealed violations of the Competition Act (CAP 504).
Mogo Auto, incorporated in Kenya in 2012 and part of the global Eleving Group, offers car financing, logbook loans, and financial solutions for boda boda and tuktuk operators.
Despite its established presence in eight counties across Kenya, Mogo was accused of unfair lending practices, including unexpected interest rate hikes and imposing repayment terms in US dollars despite disbursing loans in Kenyan Shillings (KES).
According to the CAK, four customers lodged complaints against Mogo between 2021 and 2023.
The complainants reported issues such as unpredictable loan repayments due to currency fluctuations and higher-than-expected loan balances when attempting to settle their debts.
One complainant who borrowed Sh2.1 million in June 2022 claimed that the interest rate, initially agreed at a flat 2.6pc, was switched to a reducing balance basis, with payments calculated in USD instead of Kenya Shillings.
This adjustment led to inconsistent monthly repayments, leaving the borrower exposed to unpredictable costs.
Another complainant, who took out a Sh300,000 loan in July 2021, discovered a balance of Sh392,000 after repaying for 20 months.
Similar cases were reported, where customers alleged that Mogo did not provide clear loan agreements or adjusted the repayment terms without notice, resulting in higher-than-expected payments.
After investigating the complaints, the CAK found Mogo to be in violation of Section 55(b)(i) of the Competition Act, which prohibits misleading representations, and Sections 56(1) and 56(3) on unconscionable conduct.
Mogo responded to the accusations with written and oral submissions, but was ultimately found culpable of breaching the Act.
In a settlement reached with the CAK, Mogo agreed to pay the Sh10.85 million fine and refund three(3) of the complainants a total of Sh344,939 for excess amounts charged.
Additionally, Mogo has been ordered to ensure that its employees undergo consumer complaint training by August 2035, aimed at improving transparency and customer service.
The CAK emphasized that its decision to penalize Mogo underscores the importance of consumer protection and fair business practices within the financial services sector.
The settlement serves as a reminder to financial institutions in Kenya to operate with integrity and avoid exploiting customers through misleading loan terms or hidden charges.
