Blow to Mogo as Court Declares Ksh 976,750 Loan Demand Illegal

Mogo has suffered a major legal setback after a Thika Small Claims Court declared a demand of Ksh 976,750 on a Ksh 400,000 loan illegal, citing excessive interest rates and unjustified additional charges.

The ruling immediately reduced the borrower’s liability and reinforced legal protections against predatory lending practices.

The dispute began when the lender attempted to recover more than double the original loan through accumulated interest, penalties, and multiple fees.

The borrower pushed back, arguing that the amount violated legal limits and unfairly inflated the debt.

“The claimant demanded a total of Ksh 976,750 from a principal sum of Ksh 400,000, a figure that this court finds not only excessive but illegal, as it clearly violates the legal principles governing lending and the recovery of interest,” the court ruled.

Mogo Charges Found Exploitative

Moreover, the magistrate established that the lender applied interest rates and additional charges that drove the loan far beyond lawful limits. The court emphasized that such conduct places borrowers under unfair financial pressure.

“The interest rates imposed, together with the various charges and penalties, were clearly exploitative, unconscionable, and unjustified, resulting in a grossly inflated claim that cannot be upheld under the law,” the ruling stated.

The court further stressed that lenders must act transparently and avoid structuring loans in a way that leads to unjust enrichment.

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In Duplum Rule Applied

The court also applied the in duplum rule when assessing the claim. This legal principle limits recoverable interest once it equals the principal amount.

The magistrate found that the lender breached the rule.

“This court is guided by the in duplum rule, which expressly bars the recovery of interest that exceeds the principal sum, and any claim that contravenes this threshold cannot stand,” the magistrate explained.

Consequently, the court struck out the excessive portion of the claim and allowed only a reduced and lawful amount.

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Court Sends Warning to Lenders

Finally, the judgment sends a clear warning to lenders engaging in similar practices, underscoring the need for strict compliance with lending laws.

“Lenders must operate strictly within the confines of the law and cannot enforce terms that amount to unjust enrichment or the exploitation of borrowers,” the court concluded.

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A court dealt Mogo a major setback after ruling that its demand for Ksh 976,750 on a Ksh 400,000 loan was illegal due to excessive charges and interest. PHOTO: Brian Thuranira/Facebook.