Competition watchdog fines boda boda lender Sh10m for consumer breaches

Motorbikes belonging to Members of Digital Boda Drivers and delivery Association parked during a security consultative Meeting on the issues affecting the industry at Nairobi Green Park terminus on Sunday, August 04, 2024. [File, Standard]

The Competition Authority of Kenya (CAK) has slapped Mogo Auto Ltd, a digital lender popular among boda boda operators, with a hefty fine for engaging in consumer breaches.

The regulator said the firm’s operations were marked by “misleading representations and unconscionable conduct.”

Mogo, which operates in eight counties across Kenya, was ordered to pay a penalty of Sh10.8 million and refund three customers Sh344,939 for excessive interest charges. 

The company was also directed to refrain from such practices in the future and to resolve any outstanding complaints.

CAK’s decision followed investigations into complaints lodged by four Mogo customers. 

The customers alleged that the company had misled them about loan terms, charged excessive interest rates, and engaged in unfair practices.

“Mogo’s actions were a clear violation of the Competition Act and had a negative impact on its customers,” said CAK in a statement yesterday. 

“We are committed to protecting consumers and ensuring fair competition in the market.”

The fine imposed on Mogo is a significant blow to the company and sends a strong message to other digital lenders. 

Founded in 2012, Mogo is part of the Eleving Group, an international FinTech company with a presence in 15 countries across Europe, Asia, and Africa. 

In Kenya, the company specialises in car financing, logbook loans, and providing financial services to bodaboda and tuk-tuk (three-wheeler) operators.

Following the penalty, the company said: “In reference to the settlement we have entered into with the Competition Authority of Kenya, Mogo was guided by our values that the welfare of the customer is paramount. Dollar-denominated loans were one of the products Mogo was offering to sour customers. The product had lower interest rate as compared to Kenyan shilling-denominated loans.”

“Less than 15 per cent of all Mogo customers by free choice had taken dollar-denominated loans. Unfortunately, due to currency fluctuations, loan repayment amounts for part of such customers increased. When complaints were raised through CAK, Mogo decided to enter into a settlement agreement with the CAK and the complainants,” it said in a statement.

In addition to the financial penalty, Mogo is required to refund three customers a total of Sh344,939, compensating them for excess amounts charged during loan repayments and discrepancies in the dollar exchange rate applied when loans were issued. 

The Authority has further instructed Mogo to cease misleading practices, resolve any pending customer complaints, and ensure timely handling of future grievances.

The investigation into Mogo’s practices stemmed from complaints lodged by four customers between May 2023 and April 2024.

The first complainant, who secured a Sh2.1 million loan in June 2022, alleged that Mogo unilaterally changed the loan terms from a flat interest rate to reducing balance and that interest payments were calculated in US dollars despite the loan being disbursed in Kenya shillings. 

This alteration resulted in unpredictable repayment amounts due to foreign exchange fluctuations.

Another customer, who took out a Sh300,000 loan in July 2021, recounted a similar experience. 

After 20 months of repayment, they discovered a balance of Sh392,000—much higher than anticipated—due to Mogo calculating the repayment in US dollars rather than Kenya shillings. 

Although the complainant settled the loan, they ended up paying more than originally agreed.

A third complainant highlighted issues with a Sh310,000 loan, where Mogo’s documentation referenced both Kenya shillings and US dollars. 

The customer alleged that Mogo informed them the dollar calculations were for record-keeping purposes, yet later required repayment in dollars, leading to confusion and additional costs.