CAK Slaps Mogo Auto with KES 10.8 Million Penalty for Misleading Customers: A Victory for Consumer Protection in Kenya

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Introduction:

In a landmark ruling issued on October 4, 2024, the Competition Authority of Kenya (CAK) penalized Mogo Auto Limited, a prominent asset financier in the country, with a KES 10.8 million fine for violating key provisions of the Competition Act. This decision comes after Mogo was found guilty of engaging in false and misleading representations, as well as unconscionable conduct in its loan dealings with clients.

Case Background:

Mogo Auto Limited, a subsidiary of the Eleving Group, has been operating in Kenya since 2012, providing services including car financing and logbook loans. The company was accused by four customers between May 2023 and April 2024 of altering loan terms without notice and exposing clients to unpredictable financial burdens due to currency fluctuations.

Complaints Against Mogo:

  1. First Complainant: Took a KES 2.1 million loan in June 2022, only to have the terms adjusted from a flat interest rate to a reducing balance model, with loan repayments tied to the USD-KES exchange rate, causing erratic monthly installments.
  2. Second Complainant: After taking a KES 300,000 loan in July 2021, found their balance had ballooned to KES 392,000 despite substantial repayments. The loan, issued in KES, was inexplicably calculated in USD.
  3. Third Complainant: Secured financing for half of a car’s value (KES 310,000) but faced similar currency-based recalculations that led to inflated repayment demands.
  4. Fourth Complainant: Borrowed KES 517,212 but after servicing the loan for seven months, was asked to repay KES 726,000, a result of USD-based recalculations and arbitrary interest rate hikes.

CAK’s Findings and Penalties:

After an extensive investigation, the CAK concluded that Mogo had breached sections 55(b)(i), 56(1), and 56(3) of the Competition Act by providing misleading loan terms and engaging in unethical practices. As a result, Mogo was ordered to:

  • Pay a fine of KES 10,851,473.20.
  • Refund excess amounts charged to three complainants totaling KES 344,939.
  • Resolve all pending complaints and refrain from future misrepresentation.
  • Undergo consumer compliance training by August 2025.
 

Impact and Legal Insights:

This case highlights the significant regulatory oversight that the CAK exercises over financial service providers in Kenya. The ruling underscores the importance of transparency, fair treatment, and adherence to contract terms, particularly when dealing with vulnerable consumers. It also sends a strong message to the industry on the repercussions of manipulating loan terms and imposing hidden costs on borrowers.

For financial institutions, the CAK decision reinforces the need to ensure clarity in loan agreements, especially concerning interest rates and currency exchange factors. Consumer trust, once compromised, can lead to costly legal penalties and reputational damage.

Conclusion:

The Mogo case serves as a critical reminder of the necessity for financial service providers to maintain ethical standards and transparent dealings with their clients. Institutions should review their consumer protection practices to align with CAK’s regulatory framework to avoid similar penalties in the future.