OneMain Financial was ordered by the Consumer Financial Protection Bureau to pay a $10 million fine and to refund $10 million in interest charges to 25,000 customers that the lender illegally kept over the past four years.
The CFPB said Wednesday that OneMain, based in Evansville, Indiana, had engaged in "unfair, deceptive and abusive acts and practices" by incentivizing its employees to sell so-called "add-on" products that were marketed as coming with a "full refund." The personal loan installment company tacked such products onto loans before showing the consumer any paperwork, and then told customers that it would be difficult to remove the add-on charges, even within days of canceling, the bureau said.
The CFPB said that OneMain had kept $10 million in interest charges over the past four years that should have been refunded to consumers. OneMain issued refunds from 2019 to 2021 that averaged $827 per product, with $337 attributed to interest charged on credit insurance products. Customers that cancelled noncredit insurance products such as emergency towing, identity theft protection and entertainment discounts, were sent checks that did not include refunds for interest charged, the CFPB said in its
The CFPB said OneMain makes extra profits by selling products such as roadside assistance and insurance products for unemployment coverage. OneMain directed employees "to upsell borrowers on every loan," even when consumers "had already declined the products on previous loans," the bureau said.
"OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds," CFPB Director Rohit Chopra said in a press release. "We are ordering OneMain to refund borrowers it cheated and to clean up its business practices."
OneMain has already received regulatory scrutiny before Wednesday's order. Last week, the company was ordered by New York's Department of Financial Services to pay a $4.25 million fine for
The New York State Department of Financial Services found the company failed to adequately protect itself from data breaches. Since 2018, OneMain has suffered multiple cybersecurity incidents.
OneMain said that the refunds went to 1% of its 5 million customers.
"OneMain is pleased to resolve this matter related to our refunding practices for some optional products, even though we do not agree with the CFPB's conclusions," the company said in a statement. "OneMain has agreed to issue interest refunds to the fewer than one percent of our customers who, within the last four years, received a refund of their premium or fee through a check rather than a statement credit, after canceling an optional product within 30 days of purchase."
OneMain said that customers that purchased $500 third-party membership plans typically were sent a refund check in the mail. By receiving a check, that meant the customer's loan amount remained $500 higher due to the add-on plan, and those customers continued to pay higher monthly interest charges that were not reimbursed.
Going forward, the CFPB ordered the company to expand its refund period for optional products to 60 days, up from 30 days, to give customers additional time to cancel. OneMain also is required to include interest in refunds for add-on product cancellations.
