By The Weekly Vision Reporter
In a landmark ruling that sends a strong warning to predatory lenders, the Small Claims Court in Thika has severely criticised MOGO Auto Limited for charging what it described as “exorbitant” and “exploitative” interest rates on a modest car loan.
The case lays bare the harsh realities many ordinary Kenyans face when dealing with asset-financing companies. In June 2022, Mr Aziz Daniel Odoyo Nyumbah took out a KSh 400,000 asset-financing loan from MOGO Auto Limited to purchase a vehicle. According to court documents, he made repayments totalling KSh 299,367. MOGO Auto Limited nonetheless took him to court, demanding a further KSh 677,381 in interest and costs, pushing the total sum it sought to clear the loan to KSh 976,750.
This meant the original KSh 400,000 loan had ballooned by more than 144 per cent, despite the substantial repayments already made. In a well-reasoned judgment, the court expressed deep concern over unchecked debt accumulation and declared MOGO’s demands largely unjustified.
“The interest charged was exorbitant. An effective interest rate of 86.4 per cent, exclusive of additional charges, is nothing short of exploitative,” the court found. Applying the in duplum rule, a legal principle that prevents interest from exceeding the principal amount, the court heavily reduced MOGO’s claim, ultimately entering judgment in the company’s favour for only KSh 100,631, a fraction of what it had demanded.
The judge further criticised MOGO for failing to properly explain how it had arrived at its inflated figures, including monitoring fees, insurance fees, and dollar-denominated charges that did not withstand scrutiny. The ruling shines an uncomfortable spotlight on MOGO Auto Limited and similar asset-financing firms operating in Kenya.
A number of borrowers have complained, anonymously, of:
- Extremely high effective interest rates buried in complex contracts
- Rapid accumulation of penalties and fees
- Aggressive recovery tactics, including threats to repossess vehicles
- A lack of transparency in how payments are applied
Critics argue that firms such as MOGO take advantage of Kenyans who need vehicles for business or family use, only to trap them in cycles of debt that are almost impossible to escape.
One legal expert who reviewed the judgment told The Weekly Vision: “This is a classic case of debt trapping. When a KSh 400,000 loan balloons to nearly a million shillings despite the borrower having repaid almost 75 per cent of the principal, something is fundamentally wrong with the lending model.”
The court’s decision is a timely reminder for Kenyans to exercise caution before signing financing agreements. Legal experts advise borrowers to:
- Insist on a clear breakdown of interest rates and all fees.
- Calculate the effective annual interest rate before signing.
- Seek independent legal advice on loan terms.
- Keep detailed records of every payment made.
Mr Nyumbah’s partial victory offers hope to other borrowers currently struggling under crushing loans from similar financiers.
Have you had a bad experience with MOGO or another financier? Share your story with us, anonymously, if preferred, on WhatsApp at 0718 194 159. Your testimony could help expose unfair practices.
