On May 31, 2023, the CFPB has ordered installment lender OneMain Financial to pay $20 million in redress and penalties for failing to refund interest charged to 25,000 customers who cancelled purchases within a purported “full refund period,” and for deceiving borrowers about needing to purchase add-on products to receive a loan. According to the CFPB, OneMain pushed its employees to hit sales targets and illegally withheld funds.
From CFPB Director Rohit Chopra’s statement:
“OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds. We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”
OneMain is is one of the largest non-depository personal installment lenders in the U.S., headquartered in Evansville, Indiana. The company offers loans and makes extra profits by upselling borrowers with products such as roadside assistance, unemployment coverage, and identity theft coverage.
According to the CFPB, OneMain expected and provided incentives to its employees to upsell borrowers on every loan. It was found that company training materials directed them to upsell them even when consumers had already declined the products on previous loans. The CFPB has identified that OneMain engaged in unfair, deceptive, and abusive acts or practices, including:
Tricking borrowers into signing up for optional products. OneMain customers were either led to believe that they could not receive a loan without signing up for an add-on product or adding optional products without verbally informing the consumer.
Keeping $10 million in interest charges despite its “full-refund” policy. OneMain unfairly failed to refund interest charges for about 25,000 borrowers who signed up for add-ons such as roadside assistance benefits, identity theft protection, or entertainment discounts.
The CFPB has issued a consent order that requires OneMain to:
Stop its unlawful activities and adjust its cancellation policies;
Pay $10 million in refunds to consumers for improper charges; and
Pay a $10 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.
Read the CFPB’s press release here.
The consent order can be found here.
