Payday lender fined over business methods

Take note – story published 5 years ago

The Consumer Rights Protection Center has fined joint-stock company Mogo EUR 92,000 for superficial assessment of borrowers' creditworthiness and sending customers SMS messages encouraging reckless borrowing, the center's spokeswoman Santa Zarane told the LETA newswire July 4.

The fine is made up of two parts - EUR 80,000 for systemic violations in the assessment of borrowers' creditworthiness, and EUR 12,000 for sending customers the following SMS message: "Congratulations! You have been awarded a 36-month loan of EUR 425; no collateral is required! Your monthly payment will be just EUR 25.58! To confirm the loan, call +37166900900".

The Consumer Rights Protection Center has ordered Mogo to adopt a proper procedure for assessing borrowers' creditworthiness in accordance with the Consumer Rights Protection Law.

During its probe, the Consumer Rights Protection Center found that Mogo issued loans to borrowers based on their unreported incomes that were impossible to verify, and in some cases, borrowers' creditworthiness was not assessed at all and loans were issued only based on the borrowers' account statements.

It is important that assessment of borrowers' creditworthiness be based on their actual incomes so they would not have to sell their properties or put them up as collateral in order to repay the loan, or limit their daily spending substantially. Consumer lending is overall an important and necessary service, however, lenders have to properly assess borrowers' creditworthiness, the Consumer Rights Protection Center points out.

After Mogo told the Consumer Rights Protection Center that its recommendations would reduce the number of the company's customers and affect customers unable to prove their actual incomes, the center decided to fine the company to ensure that such violations do not occur again.

As reported, Mogo generated EUR 4.1 million in turnover in the first quarter of this year, which is a 41 percent rise from the first quarter of 2017, but its profit fell 20.8 percent year-on-year to EUR 791,958.

As at March 31, 2018, net value of the lease portfolio and loans and advances to customers reached EUR 34.8 million euro, growing 9 percent compared to December 31, 2017.

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