Car logbook loans provider Mogo Auto Limited has been fined Sh10.85 million by the Competition Authority of Kenya (CAK) and ordered to refund more than Sh340,000 to three customers following investigations into false and misleading credit payment terms.
The firm was ordered to refund Sh344,939 to the three customers, the excess amounts they were charged when repaying their loans and the difference in the dollar exchange rate applied during the loan issuance.
“Mogo has also been directed to refrain from misrepresenting facts and engaging in unconscionable conduct when dealing with its clients, amicably resolve all pending complaints before the Authority, and resolve future complaints expeditiously,” CAK said.
The sanctions against Mogo followed investigations into complaints filed with the CAK by the firm’s aggrieved customers between May 6, 2023, and April 11, 2024.
The first complainant applied for a loan of Sh2.1 million or $17,828.16 at an exchange rate of Sh117 to the dollar in June 2022. The facility was payable in 60 monthly instalments at a flat interest rate of 2.6 percent.
The complainant accused Mogo of adjusting the flat rate to a reducing balance basis and that the interest payable was calculated in US dollars, despite the facility being disbursed in Kenyan shillings. This adjustment, the complainant claimed, resulted in the payment of unpredictable amounts due to foreign exchange rate fluctuations.
In a second case against Mogo, a complainant took a Sh300,000 loan facility in July 2021. After 20 months of repayment, the borrower requested a statement aiming to settle the loan in full. The loan statement indicated a balance of Sh392,000. In addition, the amount repayable had been computed in US dollars, even though the loan was disbursed in Kenyan shillings.
The complainant settled the loan but paid more than the contractually agreed due to a volatile currency exchange rate.
Loan agreement
In a third matter against Mogo, the lender financed 50 percent or Sh310,000 of the purchase price of a motor vehicle. The facility was disbursed in Kenyan shillings, but the loan agreement listed two currencies – the Kenyan shilling and the US dollar.
“The complainant says Mogo said the dollar tabulation was for record-keeping purposes. However, subsequently, Mogo calculated the loan instalment amounts in US dollars and required the complainant to pay in Kenyan shillings,” CAK said about the case.
“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 watchdog added.
A fourth complainant entered into a Sh517,212 loan agreement with Mogo in June 2022. The complainant serviced the loan for seven months after which the facility balance was tabulated as Sh726,000. As was the case with the other complainants, the loan was disbursed in Kenyan shillings but repayable in US dollars, exposing the borrower to higher instalments.
The complainant alleged that Mogo unilaterally varied the interest rate from 2.5 percent (flat rate) to 3.85 percent (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 the firm to submit a response,” CAK said.
Mogo made written and oral submissions but was found to have breached the Competition Act, specifically clauses prohibiting false or misleading representations, and engaging in unconscionable conduct during the issuance and administration of loan products to the complainants.
As part of the settlement deal with Mogo, CAK ordered the first complainant to pay Mogo Sh500,000 as the final outstanding loan amount, payable in four equal monthly instalments.
The watchdog also ruled that the second complainant be refunded Sh108,745.1, the excess amount charged by Mogo at the time of settlement, and the third and fourth complainants be refunded Sh80,915 and Sh155, 279, respectively, the difference between the exchange rate applied against and the one used at issuance of the loan.
