Three borrowers have brought a class action lawsuit against microlender Mogo Auto Ltd, claiming that its lending model and debt recovery practices are predatory, unfair and unconscionable commercial conduct, contrary to equitable principles and public policy.
The borrowers claim that the firm, which finances the acquisition of cars and motorcycles, imposes exorbitant compound interest rates that allegedly exceed prevailing market and statutory limits.
Caroline Nderitu, Wilson Mbogo Gikonyo and Joseph Muraya Wangari said many Mogo Auto borrowers have had similar experiences, giving rise to a common grievance.
“The respondent’s loan documentation and disclosure mechanisms are misleading and deceptive, deliberately concealing from borrowers the true cost of credit, the effect of foreign currency indexing, and the actual financial burden undertaken, thereby violating the principle of commercial transparency and fair dealing,” the trio said in the petition.
The High Court directed the applicants to serve the company with the court documents, ahead of the mention on December 15.
“I do not deem it fit to certify the application urgent. It shall, however, be served and responded to within 15 days of service,” the court said.
The three applicants said they brought the matter to court on their own behalf and on behalf of all other customers of the microlender who have been subjected to predatory lending practices.
“The respondent’s conduct constitutes a pattern of predatory lending, targeting vulnerable consumers with misleading promises of affordable financing while subjecting them to hidden charges, inflated insurance premiums, and repossession threats, thereby amounting to an exploitative business model affecting all class members equally,” their lawyer, Simon Mburu, said in the application.
He said that many other borrowers have fallen victim to predatory lending practices, marked by unfair loan terms, undisclosed charges, and harsh recovery methods.
These practices have caused widespread financial hardship and led to borrowers losing their property across the country, he added.
This is despite earlier regulatory action, including the Competition Authority of Kenya’s decision on October 4, 2024, which fined the company Sh10.8 million for engaging in false, misleading, and unconscionable lending, he said.
“The number of affected borrowers is extensive, estimated in the thousands and spread across different counties, rendering individual joinder impracticable and disproportionate to the value of the claims, hence necessitating representative proceedings as the most efficient and equitable mechanism for adjudication,” the lawyer said.
Mr Muraya said the firm’s lending and recovery operations is characterised by systemic and identical practices, including dollar indexing of Kenya-shilling loans, bundling of compulsory insurance premiums, concealment of true interest rates, and repossession of vehicles and motorcycles without due process, all applied indiscriminately to all borrowers.
“The applicants each entered into financing agreements identical in form, substance, and effect, thereby sustaining grievances that mirror those of thousands of other borrowers across Kenya who were similarly affected,” he said.
