CFPB Fines Installment Lender OneMain $20 Million for Upsell and Refund Practices

OneMain Financial, a nonbank personal loan installment lender, has been slapped with $20 million in redress and penalties by the Consumer Financial Protection Bureau (CFPB) for alleged deceptive sales practices. The CFPB accused the lender of duping borrowers into purchasing add-on products to receive a loan and failing to refund interest charged to around 25,000 customers who canceled purchases within a purported “full refund period.”

CFPB Director Rohit Chopra did not mince words when he commented on the matter, stating, “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.”

In a statement on the settlement, OneMain said it was “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. … OneMain provides valuable products to customers in a fair, transparent and responsible manner. We are deeply committed to our customers and doing things the right way.”

OneMain, which boasts a nationwide network of more than 1,400 branches across 44 states, offers loans and makes extra profits by upselling borrowers with products such as roadside assistance, unemployment coverage and identity theft coverage.

The CFPB said it found that OneMain tricked borrowers into signing up for optional products, leading customers to believe that they could not receive a loan without signing up for an add-on product. 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.” Company training materials directed employees to upsell products even when consumers had already declined the products on previous loans.

Over the past four years, OneMain kept approximately $10 million in interest charges attributable to add-ons canceled within its purported “full refund period.” The CFPB found that OneMain’s practices violated the CFPA’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.

As part of its agreement with the CFPB, OneMain will adjust its policies to make cancellation of add-on products easier, double the period in which a consumer can cancel an unused add-on product without cost from 30 to 60 days and include interest in refunds after add-on product cancellations at any time. The company will also pay $10 million in refunds to consumers for improper charges and a $10 million penalty to the CFPB’s victims’ relief fund.