In re: OneMain Financial Holdings LLC
Date: May 30, 2023
Issue: OneMain’s consent order with the Consumer Financial protection Bureau (CFPB) over allegedly using high pressure sales tactics to promote optional add-on products associated with personal installment loans.
Case Summary: OneMain agreed to pay a $10 million in penalties and redress to resolve CFPB claims that OneMain deceived borrowers about needing to buy add-on products to receive a loan.
OneMain is one of the nation’s largest nonbank personal lenders, specifically catering to subprime borrowers. OneMain operates online through a branch network spanning 44 states.
CFPB claimed OneMain used high pressure sales tactics to encourage borrowers to buy optional add-on products, which were misrepresented as required or included within the loan. OneMain employees were allegedly incentivized to upsell add-on products to borrowers on every loan. According to CFPB, OneMain often added these products to the loan at the outset without telling consumers about the add-ons or making clear that they were optional.
Additionally, CFPB alleged OneMain failed to refund the associated interest charges despite promising full refunds for add-on products cancelled within the reasonable cancellation period. CFPB claimed more than 25,000 customers collectively paid OneMain approximately $10 million in interest attributable to add-on products cancelled within the full refund period. OneMain attributes this issue to the use of different refund methods, which the company promised to make uniform going forward.
CFPB also alleged some of OneMain’s borrowers did not discover optional add-on products were attached to their loans until after the full refund period. Due to this, many of OneMain’s customers have cancelled optional add-on products after the full refund period. Despite the products being added to the loans without their consent, CFPB alleged customers were only refunded partial premiums, and none of these customers were refunded the interest charged on the premiums or fees.
Bottom Line: OneMain neither admitted nor denied CFPB’s findings. OneMain maintains the refund issue addressed by the consent order affects less than 1% of its customers.
Documents: Consent Order