Mogo fined Ksh.10.9M for misleading loan practices

The Competition Authority of Kenya (CAK) has ordered asset financier Mogo to pay a penalty of Ksh.10.9 million for engaging in false and misleading representation and engaging in unconscionable conduct against its customers.

Investigations into Mogo's practices were initiated following complaints submitted to the Authority by four customers between May 6, 2023, and April 11, 2024.

The company, which specializes in car financing and logbook loans, has also been ordered to refund three loan customers a total of Ksh.344,939.

This amount reflects the excess charges they incurred during repayment, as well as discrepancies in the dollar exchange rate applied at the time of loan issuance.

"The first complainant alleged that they applied for a loan in June 2022. The facility of Ksh.2,100,000, (USD 17,828.16 at the exchange rate of KES. 117 to USD 1) was payable in 60 monthly instalments at a 2.6% flat interest rate," a statement from CAK reads in part.

"The complainant accused Mogo of adjusting the terms from flat rate to reducing balance basis, and that the interest payable was calculated in USD, despite the facility being disbursed in shillings. This adjustment, they claimed, caused payment of unpredictable amounts due to foreign exchange fluctuations."

The second complainant claimed to have taken a Ksh.300,000 loan in July 2021 and, after 20 months of repayment, requested a statement to settle the loan.

The statement however showed a balance of Ksh.392,000 and was computed in USD, even though the loan was originally disbursed in shillings. The complainant settled the loan but paid more than agreed.

The third complainant likewise received Ksh.310,000 from Mogo for a vehicle purchase, with the loan agreement listing both shillings and USD. Mogo claimed the USD calculations were for record-keeping, yet later calculated instalment amounts in USD, requiring payments in shillings.

Further, the complainant claimed Mogo did not furnish them with the loan agreement and introduced a new document (General Provisions), which was not availed during the initial negotiations.

"The fourth complainant entered into a Ksh.517,212 loan agreement with Mogo in June 2022. The complainant serviced the loan for seven months after which their facility balance was tabulated as Ksh. 726,000," said CAK.

"As was the case with the other complainants, the loan was disbursed in shillings but repayable in USD, exposing them to higher installments. The complainant further alleged that Mogo unilaterally varied the interest rate from 2.5% (flat rate) to 3.85% (reducing balance), contrary to the contract terms."

Upon reviewing the four complaints, the Authority initiated an investigation and informed Mogo of the allegations and invited them to respond to the accusations, premised on possible violation of the Competition Act CAP 504.

"Upon analyzing the evidentiary information from the complainants and the accused party, the Authority concluded that Mogo had violated the Act, specifically clauses prohibiting false or misleading representations, and engaging in unconscionable conduct during issuance and administration of loan products to the complainants," said CAK.

"Upon being issued with a Notice of Proposed Decision by the Authority, Mogo indicated amenability to settle the matter administratively."

"Upon considering the foregoing, the Authority and Mogo entered into a settlement agreement in which the financial services provider has been ordered to pay a penalty of Ksh.10,851,473."  

Mogo was also ordered to pay the first complainant Ksh.500,000 as the final outstanding loan amount in four equal monthly installments, refund the second complainant Ksh.108,745.1 for excess charges at the time of settlement with the Authority, and refund the third and fourth complainants Ksh.80,915 and Ksh.155,279, respectively, for the difference in exchange rates applied during loan application and issuance.

"Amicably resolve all the pending complaints lodged at the Authority, resolve any future complaint within the stipulated timelines, and refrain from engaging in similar conduct in future," CAK said.

"Mogo and its employees to undergo consumer compliance training by 30th August 2025."