Kenya’s competition authority has recently fined Eleving’s Kenyan subsidiary, Mogo Kenya, for misleading customers in what marks another instance of unethical practices among digital lenders in the country. The fine of $84,120, imposed by the Competition Authority of Kenya (CAK), comes after a year-long investigation and reveals the ongoing exploitation of borrowers, despite new regulations designed to curb such behaviour.
Mogo Kenya, as reported by TechCrunch, is accused of altering loan terms without informing its clients, forcing them to pay higher interest rates than initially agreed. In one notable case, the company calculated interest in U.S. dollars while issuing loans in Kenyan shillings, leading to inflated repayments. In another instance, Mogo unilaterally increased the interest rate, violating the terms of its contract with borrowers. The regulator found that the company failed to disclose all terms and pricing models to customers upfront, a clear violation of the competition law.
While Mogo has disputed the claims, stating that customers voluntarily agreed to dollar-denominated loans (which have since been discontinued), the company has not addressed the more serious allegations of altering loan terms without prior notice. The CAK has ordered Mogo to refund the excess amounts charged and issued a formal warning.
This case highlights a broader issue in Kenya’s digital lending industry. Even with the 2022 law that requires lenders to adhere to anti-money laundering standards, protect consumer privacy, and disclose all charges upfront, unethical practices persist. Before these regulations were put in place, many digital lenders capitalized on loopholes to charge exorbitant interest rates, breach privacy rights, and use aggressive debt recovery tactics. This led to numerous complaints from borrowers, and in some tragic cases, the consequences were dire.
Mogo is one of 85 licensed digital lenders in Kenya, out of over 700 companies that have applied for licenses since the introduction of the 2022 regulations. The fact that such practices continue, even among licensed lenders, casts doubt on the effectiveness of the current regulatory framework.
And Mogo is not alone. Reports from the Office of the Data Protection Commissioner indicate that other digital lenders, like Platinum Credit and Premier Credit, also engage in unethical practices. Customers have lodged complaints about receiving persistent marketing calls, even after requesting to be removed from databases. Some loan recovery apps, including Asapkash, Mulla, and Azura, have been accused of harassing people to recover loans borrowed by others.
Despite the new regulations, the digital lending industry in Kenya remains a murky space for many borrowers. The hope is that cases like Mogo’s will encourage stricter enforcement of the law and push lenders to operate transparently, protecting consumers from predatory practices.
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