CFPB Orders OneMain to Pay $20 Million in Penalties and Redress
Last week, the Consumer Financial Protection Bureau (CFPB) ordered installment lender OneMain Financial to pay $20 million in penalties and redress due to a failure to refund interest that was charged to 25,000 customers who canceled their purchases within the designated “full refund period,” and for deceiving customers about needing to purchase additional products to get a loan. $10 million will go to harmed consumers and the other $10 million will go to the CFPB’s victims relief fund.
“OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds,” said Rohit Chopra, CFPB Director. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.” The lender incentivized employees to upsell borrowers loans by persuading customers to add on products like identity theft protection, roadside assistance, and discounts on entertainment.
The CFPB found that OneMain tricked borrowers into adding on products by leading them to believe they could not receive a loan otherwise. Some employees practiced “pre-packing,” adding the products to paperwork without telling the consumer. Employees were expected to make it seem difficult to remove the products if the borrower noticed.
OneMain told consumers they would get a full refund on add-ons if they canceled within a certain period, but the lender failed to refund nearly 25,000 consumers who had already been charged interest. The lender kept about $10 million in interest charges that should have been refunded over the last four years.
“OneMain provides valuable products to customers in a fair, transparent, and responsible manner,” said the lender in a statement, according to Banking Dive. “We are deeply committed to our customers and doing things the right way. This resolution is consistent with our mission of improving the financial well-being of hardworking Americans.”
Along with paying $20 million in penalties and redress, the CFPB is requiring OneMain to adjust its cancellation policies so consumers can cancel add-on products more easily. OneMain is also required to double their cancellation period from 30 to 60 days, and include interest in refunds any time after add-on product cancellations.