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CAK probes digital lenders over high fees, opaque loan terms
Competition Authority of Kenya (CAK) Director-General David Kibet Kemei speaks during the launch of the 2024 Banking Customer Satisfaction Report at the Radisson Blu Hotel on February 12, 2025.
Photo credit: Francis Nderitu | Nation Media Group
The Competition Authority of Kenya (CAK) is investigating several digital lenders following a surge in consumer complaints on excessive interest charges and hidden clauses in loan contracts.
CAK Director-General David Kemei told the Business Daily that the digital lending industry is among the new sectors the authority is actively scrutinising after receiving multiple reports of abuse.
“We’re looking into the sector because of many complaints that we’re getting – complaints about interest rates being too high, use of different currencies, and non-disclosure of information when contracting the loan,” said Mr Kemei. He declined to name the specific lenders under probe, citing “risks of prejudicing investigations”.
Although digital lenders are primarily regulated by the Central Bank of Kenya (CBK), which licenses and approves their pricing models, misconduct in the sector has increasingly drawn the attention of other regulators such as the Office of the Data Protection Commissioner (ODPC) –and now, for the first time, the CAK.
Traditionally, CAK has left financial sector-related consumer protection issues to the CBK. However, the current investigations mark the authority’s first major move into the digital lending space.
The regulator said it has received numerous complaints about unfair and exploitative lending practices, including cases where some players charge interest rates as high as 40 percent for loans with repayment periods of just one month.
In some instances, borrowers have alleged being asked to repay loans in foreign currency –such as US dollars—instead of Kenyan shillings, raising additional concerns about non-transparent and potentially unlawful loan terms.
Despite CBK’s role in licensing and approving pricing models, it does not set base interest rates for digital lenders as it does for commercial banks and microfinance institutions—leaving digital lenders with broad discretion provided they align with their approved models.
“Consumers have complained of not being informed in advance about loan pricing, terms and conditions, and in some cases, being subjected to repayment obligations in currencies they did not agree to,” Mr Kemei added.
“These are consumer protection issues that we cannot ignore. We need to deal with them even before we have the amendment to the Competition Act to give us the mandate to regulate digital markets.”
In the 12 months to June, CAK initiated 858 consumer protection investigations, up 28 percent from 668 the previous year, as it broadened its focus to include emerging sectors such as digital lending.
Apart from complaints submitted to the CAK, Kenyans have also raised data privacy concerns against digital lenders, prompting enforcement action from the ODPC and investigations by the CBK over potential violations of licensing conditions.
The CBK has since started a review of the Digital Credit Provider regulations aiming to broaden its oversight.
to cover all credit providers regardless of the delivery channel—part of an effort to close regulatory gaps that have left many borrowers vulnerable to exploitation.
