OneMain Financial ordered to pay $20 million for deceptive practices
Key takeaways
In May 31,2023, the Consumer Financial Protection Bureau ordered OneMain Financial to pay $20 million for deceiving and misleading some 25,000 consumers.
The company was accused of pushing unnecessary add-on products on its loans, as well as not honoring its refund policy.
Affected borrowers will receive a refund, along with interest from the lender.
OneMain Financial — was found to have been engaging in deceptive and misleading lending practices in a recent investigation by the Consumer Financial Protection Bureau (CFPB). The lender has been ordered by the agency to pay $20 million in redress and penalties — $10 million of which will go to impacted borrowers.
Who is OneMain Financial and why is it being ordered to pay $20 million by the CFPB?
OneMain Financial is a financial services company that offers loans and credit card products. The company, which has been in business since 2010, has 1,400 branches in 44 states and is best known for catering to those with lower credit scores.
According to the CFPB, OneMain pressured its employees to engage in illegal sales and lending practices. This included upselling and deceiving borrowers about needing to purchase add-ons to get approved for its loans.
The CFPB’s press brief states that employees were trained to upsell even after borrowers rejected similar add-ons. Employees were also threatened to lose their jobs if they didn’t upsell enough, as they were “evaluated on the basis of their sales rate.”
CFPB’s enforcement action includes mandatory refunds, changed policies
As a result of the investigation, OneMain is required to adjust its policies to avoid a similar situation happening in the future. Among halting its unlawful lending practices, the lender is now required to double the cancellation period of an unused add-on from 30 days to 60.
The $10 million in refunds to eligible customers includes the interest accrual that was charged after the add-ons were canceled, and the remaining $10 million in penalty charges will go toward the CFPB’s victims relief fund.
OneMain accused of two primary wrongdoings
Through its investigation, the CFPB found that the lender deceived some 25,000 borrowers and withheld refunds, the latter of which is a violation of the Consumer Financial Protection Act’s (CFPA) prohibition on unfair practices.
Deceiving borrowers about necessary purchases
Many consumers were led to believe by a company representative that they wouldn’t get approved for a loan unless they signed up for an optional product. In some cases, these products were added to the contract without informing the customer.
If the customer then asked for this additional product to be removed, it was a reportedly difficult process. Some employees also allegedly hid disclosures from borrowers, contradicting what the original disclosures stated.
Withholding refunds
OneMain is also under fire for not honoring its own “full refund policy” and withholding funds from those who would have otherwise qualified for the refund. The lender allegedly told borrowers that they would be eligible for a full refund if they canceled the purchase of an add-on within the specified amount of time.
What’s more, OneMain’s predetermined interest accrual on specific loans means that customers were also charged nonrefundable interest accrual during the refund period.
“OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds,” said CFPB Director Rohit Chopra in a press brief. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”
What to do if you think you’ve been deceived by your lender
Borrowers involved in the OneMain Financial don’t need to take any further action at the moment, and should be on the lookout for new information from the CFPB or OneMain. Those impacted will receive an additional interest refund from the lender in accordance with its agreed-upon timeline with the CFPB.
If you believe you’ve been a victim of misleading or deceptive practices by OneMain or any other lender or financial institution, you can file a formal complaint by calling 855-411-2372. You can also file a complaint online, via the CFPB website.
If you are an employee of a financial institution and believe that the company has violated the CFPB’s regulatory standards or the federal consumer financial laws, you can send the information to whistleblower@cfpb.gov.
