On May 31, 2023, the Consumer Financial Protection Bureau (CFPB) took decisive action against installment lender OneMain Financial, demanding the payment of $20 million in penalties and redress. In the consent order, the lender does not admit or deny any of the findings of fact or conclusions of law, but the consent order is based on allegations that the lender misled sales practices, including illegally withholding refunds and pressuring employees to achieve sales targets.
The CFPB's investigation revealed that for several years, OneMain apparently misled tens of thousands of consumers who purchased and later canceled optional add-on products, such as roadside assistance, unemployment coverage, and identity theft coverage. Further, the consent order maintains that OneMain falsely represented that customers could avail themselves of a "full refund period" during which they could cancel the products and be restored to their original financial position, as if the products had never been added to their loans.
Based on its findings, the CFPB concluded that OneMain engaged in deceptive acts and practices, violating the Consumer Financial Protection Act of 2010 (CFPA). The lender apparently misled consumers into believing that they were required to purchase add-on products to secure loans, and that they could cancel these products within a specified timeframe without incurring any costs.
Furthermore, the CFPB determined that OneMain engaged in unfair acts and practices by charging consumers for add-on products they did not agree to purchase, and subsequently failing to refund the full premium and interest accrued on these products. Additionally, OneMain seemingly charged and withheld interest that accrued on add-on product fees during the purported "full-refund period."
Consequently, the CFPB issued an order that requires OneMain to cease its unlawful activities and make necessary policy adjustments to facilitate the cancellation of add-on products. OneMain must also include interest in refunds following the cancellation of these products. Moreover, the lender is obligated to provide a minimum of $10,000,000 in consumer redress to rectify the financial harm caused by its deceptive practices. To reinforce the severity of the violations, OneMain is also required to pay a civil money penalty amounting to $10,000,000. This penalty serves as both a deterrent and a means to fund the CFPB's ongoing efforts to support and assist victims in similar cases. In addition to these measures, OneMain is compelled to implement robust compliance measures to ensure future adherence to consumer financial protection laws.
