The Competition Authority of Kenya (CAK) has dealt a significant blow to Mogo Kenya Auto Limited, a subsidiary of the Eleving Group, for engaging in deceptive and unfair business practices. The company has been ordered to pay a hefty penalty of KES 10,851,473.20 and refund affected customers.
The CAK’s Investigation
Following complaints from four customers between May 2023 and April 2024, the CAK launched an investigation into Mogo Kenya’s operations. The investigation uncovered a pattern of unethical practices that violated the Competition Act CAP 504.
Mogo Kenya was found guilty of:
- False and misleading representations: The company adjusted loan terms from a flat rate to a reducing balance basis without clearly informing customers.
- Unconscionable conduct: Mogo calculated interest in USD for loans disbursed in KES, exposing customers to foreign exchange fluctuations.
- Unilateral interest rate changes: The company unilaterally varied interest rates, going against the terms of loan agreements.
- Incomplete loan agreements: Mogo failed to provide customers with complete loan agreements, leaving them unaware of their rights and obligations.
The CAK’s Decision
As a result of these findings, the CAK has imposed a substantial penalty on Mogo Kenya and ordered the company to refund three loan customers a total of KES 344,939. The refunds are intended to compensate the customers for excess charges and exchange rate discrepancies.
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Implications for the Financial Services Industry
The CAK’s decision sends a strong message to the financial services industry in Kenya. It highlights the importance of fair and transparent business practices and the consequences of violating consumer rights.
The penalty imposed on Mogo Kenya serves as a deterrent to other companies that may be tempted to engage in similar unethical behaviour.
Consumer Protection and Financial Literacy
This case also underscores the need for consumers to be vigilant and aware of their rights. By reporting unfair practices to the CAK, consumers can help protect themselves and others from exploitation.
Additionally, financial literacy initiatives can empower consumers to make informed decisions and avoid falling victim to deceptive marketing tactics.
Training Requirement for Mogo Employees:
To prevent similar occurrences in the future, the CAK has directed Mogo and its employees to undergo consumer compliance training by August 30, 2025. This training will equip Mogo’s staff with the necessary knowledge and skills to adhere to consumer protection laws and regulations.
In response, Mogo has voluntarily stoppedĀ issuing dollar-denominated loans following a settlement agreement with the Competition Authority of Kenya (CAK).
The decision comes in response to complaints filed with the CAK regarding Mogo’s lending practices. While Mogo maintains that its dollar-denominated loans were fully legal and compliant with Kenyan regulations, it chose to enter into a settlement agreement to avoid further legal proceedings.
Key Points from the Settlement:
- Voluntary Cease of Dollar-Denominated Loans: Mogo has stopped issuing new dollar-denominated loans in Kenya effective May 2024.
- No Fine Imposed: The settlement agreement does not involve a fine, as Mogo’s lending practices were deemed legal within the existing regulatory framework.
- Goodwill Gesture: Mogo’s decision to settle was a goodwill gesture rather than an admission of wrongdoing.
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Impact on Mogo’s Operations:
While the cessation of dollar-denominated loans may affect a portion of Mogo’s customer base, the company remains committed to providing a wide range of financial services to Kenyans. Mogo’s focus will now be on expanding its offerings in other areas, such as mobile money, credit cards, and personal loans.
As Kenya continues to grow its digital economy, it is important for financial services providers to operate within a transparent and accountable framework.
The Mogo-CAK settlement serves as a reminder of the need for ongoing dialogue between regulators and industry players to ensure a fair and competitive market.
The CAK’s action against Mogo Kenya is a significant step towards ensuring a fair and competitive financial services market in Kenya. It sends a clear message that unethical practices will not be tolerated and that consumers’ rights will be protected.