Asset financier Mogo fined Sh11M for duping customers
Boda boda (motorcycle) loan provider Mogo has been hit with a Kes10.9 million fine for misleading customers by among others charging them over and beyond their loan facilities.
In a statement released Friday, the Competition Authority of Kenya has ordered the company to pay a penalty of Kes10,851,473.20 for breaching provisions of the Competition Act CAP 504. The industry watchdog established that Mogo engaged in false and misleading representation of loan agreements.
“In addition … Mogo has been directed to refund three loan customers Kes344,939, being the sum of excess amounts charged in repayment of their facilities, and the difference in the dollar exchange rate applied during issuance,” reads part of the CAK statement.
Investigations into the asset financier, which is part of the Eleving Group, operating in 15 countries across Europe, Asia and Africa, were occasioned by complaints lodged with the Authority by four customers between 6th May, 2023 and 11th April, this year. Mogo was incorporated in Kenya in 2012 and currently has a presence in eight counties.
In the first complaint, a loan dated June 2022 of Kes2,100,000 (USD17,828.16 at the exchange rate of Kes117 to USD 1) was payable in 60 monthly instalments at a 2.6 percent flat interest rate. However, CAK investigations showed that Mogo adjusted the terms from flat rate to reducing balance basis, and that the interest payable was calculated in USD.
This happened despite the facility being disbursed in the local currency to the customer. In their defence, however, this adjustment, Mogo claimed, caused payment of unpredictable amounts due to forex fluctuations.
The second complainant stated that they took a loan of Kes300,000 in July 2021 and after repaying
for 20 months, they sought a statement from Mogo aiming to settle any balance. To their utter shock, however, Mogo’s statement indicated they had a balance of Kes392,000. In this matter, the amount repayable had been computed in USD despite being disbursed in KES, making it pay more than contracted when they settled the loan.
In yet another instance where Mogo was caught abusing customers, a complainant asserted that the company financed 50 percent or Kes310,000 of the purchase price of a motor vehicle. In a bizarre turn of events however, the facility was disbursed in KES, even as the loan agreement captured two currencies – KES and USD.
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Varying interest rate charges
Here, the complainant alleged that despite Mogo explaining that the dollar tabulation was for record-keeping, the loan instalments were calculated in USD but required the complainant to pay in KES. They also claimed that Mogo did not furnish them with the loan agreement and introduced a new document (General Provisions), which was not presented during the initial negotiations.
Lastly, the fourth complainant entered into a Kes517,212 loan agreement with Mogo in June 2022 and serviced it for seven months. Upon request of the loan statement at this point, their facility balance was tabulated as Kes726,000. As was the case with the other complainants, the loan was disbursed in KES but repayable in USD, exposing the borrowers to sky high instalments.
What’s more, the complainant further 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.
The Authority initiated an investigation on possible violation of section 55(b)(i) of the Act, on false or misleading representations and sections 56(1) and 56(3) of the Act on unconscionable conduct.
“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.
