OneMain to pay $20M for deceptive sales practices

The CFPB has announced a Stipulated Consent Order against installment lenders OneMain Financial Holdings, LLC; OneMain Financial Group, LLC; OneMain Financial (HI), Inc.; OneMain Financial, Inc.; and OneMain Financial of Minnesota, Inc. ("OneMain") to pay $20 million in redress and penalties ($10 million in refunds to harmed consumers and $10 million to the CFPB's victims relief fund) 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.

The CFPB describes OneMain as a nonbank personal loan installment lender headquartered in Evansville, Indiana, and a subsidiary of OneMain Holdings, Inc. (NYSE:OMF). OneMain is one of the largest non-depository personal installment lenders in the United States. It has a nationwide network with more than 1,400 branches across 44 states. The company offers loans and makes extra profits by upselling borrowers with products such as roadside assistance, unemployment coverage, and identity theft coverage.

The CFPB found that OneMain:

• Tricked borrowers into signing up for optional products: OneMain customers were allegedly led to believe that they could not receive a loan without signing up for an add-on product. Some employees added the products to paperwork without verbally informing the consumer that the products were included or optional, a practice referred to internally as “pre-packing.” If the consumer identified the products and asked for their removal, employees were expected to make it seem difficult to remove the products. In other cases, employees obscured written disclosures from consumers’ view, or verbally contradicted them.
• Kept $10 million in interest charges despite its “full-refund” policy: OneMain is alleged to have told borrowers they would receive a “full refund” on add-on purchases if they cancelled within a certain period (generally 30 days). However, 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. Because of how OneMain precomputed interest on some loans, customers had already been charged significant amounts of interest that the company did not refund. Over the past four years, OneMain kept approximately $10 million in interest charges attributable to add-ons cancelled within its purported “full refund period.”

The CFPB found that OneMain’s practices violated the Consumer Financial Protection Act’s prohibition on unfair practices by charging and then failing to refund the full premium or fee and interest that accrued on add-on products consumers did not agree to purchase. OneMain also charged and failed to refund interest that accrued on add-on product fees during an advertised full refund period. Finally, the CFPB found OneMain was illegally interfering with consumers’ ability to understand that certain products were optional, and that OneMain charged non-refundable interest during the purported full-refund period.

The CFPB's order requires OneMain to adjust its cancellation policies, provide $10 million in refunds to consumers for improper charges, and pay $10 million in penalties to the CFPB's victims relief fund.