Mogo Credit has once again found itself at the center of controversy after a Kenyan court declared one of its loan arrangements illegal, exposing lending practices that left a borrower facing an enormous debt despite having made substantial repayments.
The ruling has renewed concerns about whether some of the company’s loan products are designed in a way that places borrowers under excessive financial pressure.
The case involved a borrower who obtained a loan of KSh 400,000 from Mogo.
By the time the dispute reached court, the borrower had already repaid KSh 299,369. Despite these payments, Mogo claimed that the customer still owed KSh 677,381.
This meant the total amount the borrower would have paid back was set to reach KSh 976,750, more than double the original loan amount.
The Small Claims Court rejected Mogo’s position and found that the loan terms were oppressive and exploitative. According to the court, the effective interest rate stood at about 86.4 percent.
In addition to the interest, the borrower was subjected to various extra charges, including penalties, monitoring fees, and insurance costs.
The court noted that Mogo failed to clearly explain how these additional amounts were calculated or justify why they were necessary.
In its decision, the court applied the in duplum rule, a legal principle that prevents interest from exceeding the original loan amount.
After reviewing the payments already made, the court ruled that the borrower only owed KSh 100,631, together with normal court interest and costs.
The judgment significantly reduced the amount Mogo had been demanding and highlighted how quickly loan balances can grow when multiple charges are added.
The ruling is not an isolated incident. Mogo has faced criticism from regulators and customers over the years regarding the transparency of its loan products.
Way back, the company was fined KSh 10.85 million after investigations found false and misleading representations as well as unconscionable conduct.
Some borrowers complained that while loans were issued in Kenyan shillings, repayments were linked to the US dollar, exposing them to exchange rate fluctuations that increased the cost of borrowing.
The authority’s investigations revealed cases where borrowers saw their outstanding balances rise even after making regular repayments.
The regulator also ordered refunds to affected customers, with more than KSh 344,000 being returned.
Concerns about Mogo’s operations continued into 2025 when three borrowers filed a class action suit in the High Court on behalf of thousands of customers.
The suit alleges hidden charges, compulsory insurance costs, and aggressive repossession practices involving vehicles and motorcycles.
The borrowers argue that many customers enter into financing agreements expecting affordable credit but later discover costs that were not clearly understood at the beginning.
These court cases and regulatory findings raise serious questions about transparency and fairness in the asset-financing sector.
For many Kenyans seeking loans to support their businesses or personal needs, access to credit can be important.
However, when charges, fees, and interest accumulate beyond what borrowers reasonably expect, the result can be severe financial strain.
The latest court ruling sends a strong message that lenders must be transparent about loan costs and operate within the law.
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