Kenya’s competition authority has fined Baltic lender Eleving‘s Kenyan subsidiary for misleading its customers, casting a spotlight on the continuing unethical operations of a section of digital lenders in the country despite a new law.
The Competition Authority of Kenya (CAK) imposed a fine of $84,120 on Eleving subsidiary Mogo Kenya for violating competition law by misleading customers and secretly altering loan terms so it could force clients to pay extra interest.
The fine, though small, highlights how a slew of digital lenders in the region have been operating unethically and violating privacy rights, flouting regulations that came into effect in 2022 to rein in unethical digital lenders. The law requires all online lenders to observe anti-money laundering laws, protect consumer privacy and data protection rights, disclose all terms and charges to consumers, and obtain operating licenses.
Before this law, many digital lenders took advantage of previous loopholes in policy to levy high interest rates, violate customer privacy rights, use predatory lending practices, and employ archaic debt recovery techniques that have left behind a trail of terrified borrowers and, in one case, even a suicide.
The fine follows a year-long investigation by the regulator after Mogo’s clients lodged complaints. The authority said it found that Mogo had forced its clients to pay extra for loans after altering terms without the customers’ knowledge.
In one case, Mogo had calculated interest to be paid in USD while the loan was issued in Kenyan shillings, which the authority says led to extra repayments. And in another, the regulator said Mogo “unilaterally varied the interest rate from 2.5% (flat rate) to 3.85% (reducing balance),” contravening terms of the contract. The company also failed to disclose all terms and its pricing model to customers beforehand, the regulator said.
Mogo, which also has operations in Lithuania, Estonia, Romania, Moldova, Georgia, Armenia, Latvia and Uzbekistan, was instructed to refund the excess amounts it charged the complainants, and given a warning.
Mogo told TechCrunch it was not at fault, saying customers willingly signed up for the dollar-denominated loans, which it stopped issuing in May. However, it didn’t address the other issues raised, including the allegation that it was changing loan terms without prior knowledge of customers.
Mogo’s parent company Eleving Group, currently in the midst of going public, reported revenues of €106 million for the first half of the year.
Kenya is home to hundreds of digital lenders but has so far only granted licenses to 85 (Mogo is one of these), of the 730 companies to apply since March 2022.
Mogo sells vehicle and consumer financing, and operates via both online and offline channels in Kenya, allowing its customers to make initial applications through its website, at its brick-and-mortar outlets or via a network of agents.
Mogo is not alone in ignoring regulations, as details from Kenya’s Office of the Data Protection Commissioner show that a number of digital lenders continue to flout the law.
Some people have lodged complaints over receiving incessant calls from agents marketing loans from Platinum Credit and Premier Credit despite making requests to be removed from their database. Meanwhile, there are numerous reports of how other apps like Asapkash, Mulla, Azura, Ceres, and Lendplus called people endlessly to recover loans taken by other parties.
Updated to include names of some of the apps flagged for harassing people
