Complaints to the competition watchdog about digital lenders’ hidden charges, change of borrowing terms and premature assets seizure amid tighter regulations aimed at curbing predatory lending.

Data from the Competition Authority of Kenya (CAK) show complaints from borrowers rose to 355 cases in the year to June last year, up from 67 the previous year.

The financial services sector accounted for the most customer complaints in the year, accounting for 61.6 percent of reports filed with the competition watchdog or 564 instances out of 915 total cases.

The CAK says grievances against the digital lenders were mainly about false and misleading representations and unreasonable conduct.

Kenya in 2022 changed the law to allow the central bank to regulate digital lenders, a move that gave the regulator powers to rein in lenders who violate consumer privacy and engage in predatory lending.

The law gave the Central Bank of Kenya (CBK) power to control the lenders following complaints from borrowers who can pay annualised interest rates of more than 100 percent.

The competition watchdog investigates consumer complaints related to false advertising, defective products, and improper business conduct, such as hidden fees or unfair contract terms.

“This sector has, over the years, continued to record a high number of cases, a phenomenon which is attributable to the rapid growth of digital lending companies and digital applications that ease access to loans to consumers, albeit with attendant violations of consumers welfare provisions,” the CAK said in its annual report covering the period to June 2025.

“The main consumer infringements included false and misleading representations and unconscionable conduct. Further, complaints against both deposit and non-deposit taking financial institutions, such as banks, microfinance and saccos, relating to non-disclosure of fees and charges as well as unilateral mutation of terms and conditions were investigated.”

Microfinance institutions (MFIs) had the second-highest breaches among financial service providers at 20 percent or 113 cases, ahead of saccos which had 68 cases.

Commercial banks registered the lowest number of customer complaints at 28 or five percent of the grievances.

Sector-wise, wholesale and retail trade registered the second highest customer infractions at 17.5 percent, manufacturing at 3.6 percent and e-commerce at 3.3 percent.

Cumulatively, the CAK received and investigated 915 consumer cases drawn from 20 sectors of the economy, a 37 percent increase from 668 cases previously.

The competition watchdog finalised 57.3 percent of the total cases investigated, resulting in consumer savings of Sh21.4 million.

It received a complaint from Nelson Mwongela that African Capital Limited, a licensed digital credit provider, had inflated a Sh177,720 loan to Sh500,000 through the unilateral imposition of charges.

Upon the CAK’s intervention, the inflated amount was waived, and the loan account was closed.

Gibson Mwenda, meanwhile, lodged a complaint with the competition watchdog, noting that Mwananchi Credit Limited, another licensed digital lender, repossessed his vehicle within two months of obtaining a loan from the firm before the consideration of a dispute resolution clause in the contract.

Mr Mwenda noted that the vehicle was his source of income in servicing the loan.

The CAK advised the complainant to lodge the matter with the Small Claims Court.

Other digital lenders caught up in the consumer complaints were Mogo Auto Limited, Supreme Credit Acceptance Limited, Simple Pay Capital Limited and Premier Credit.

The CAK closed some of the cases after complainants failed to provide evidence.

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

A proliferation of lenders using the same technology to extend credit to the banked and unbanked alike has saddled borrowers with high interest rates and forced regulators to step in.

The complaints against digital lenders continue as the regulatory noose tightens, with players in the industry requiring licences from the CBK since 2022.

The regulator licensed an additional 25 digital credit providers (DCPs) earlier this week, bringing the total number of approved lenders to 252, since the licensing regime began in 2022.

Before 2022, hundreds of digital lenders were not covered by any of the existing laws.

More than 500 digital lenders are yet to get approval from the CBK.

The CBK said it has received more than 800 applications, leaving about 548 applicants at various stages of the review process, where most are yet to submit the documentation required to complete licensing.

The digital lenders have rivalled traditional banks in the issuance of credit, with CBK revealing that licensed DCPs had granted 8.3 million individual loans, valued at Sh150 billion as of May 2026.

Despite increased scrutiny, digital lenders have dominated violations, contributing to the largest share of recent determinations by courts and the Office of the Data Protection Commissioner (ODPC) on violations of consumer privacy.

The violations have attracted millions of shillings in fines from the ODPC.

→ kmuiruri@ke.nationmedia.com

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