CFPB orders OneMain Financial to pay $20M over sales practices

The Consumer Financial Protection Bureau (CFPB) on Wednesday announced that it has ordered mortgage lender and servicer OneMain Financial to pay $20 million in redress and penalties stemming from sales practices the Bureau has called “deceptive.”

Among the allegations, the CFPB alleged that the lender “pushed employees to hit sales targets and illegally withheld refunds.”

“OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds,” said CFPB Director Rohit Chopra in announcing the action. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”

The CFPB’s order is specifically focused on OneMain’s status as an installment lender, saying that it routinely offers additional products and services alongside its loans including roadside assistance, unemployment coverage and identity theft coverage. This is where an additional grievance was found by the Bureau.

“OneMain expected its employees to upsell borrowers on every loan,” the CFPB said. “Employees were incentivized to push more products, and company training materials directed them to upsell them even when consumers had already declined the products on previous loans. Salespeople were evaluated on the basis of their sales rate and could even be fired if they did not upsell enough.”

As a result, CFPB says that OneMain “tricked” borrowers into signing up for additional products, with some customers believing that they could not receive a loan unless they purchased one of the add-on products. CFPB also said that some employees added some additional products to a loan’s paperwork, and made it seem as if they would be too onerous to remove if a consumer identified them as part of their loan.

CFPB also says that OneMain kept $10 million in interest charges despite a stated policy offering borrowers a “full refund” on add-on purchases if they canceled within a certain period of typically around 30 days.

“However, OneMain unfairly failed to refund interest charges for about 25,000 borrowers who signed up for add-ons such as roadside assistance benefits, identity theft protection, or entertainment discounts,” the Bureau said. “Because of how OneMain precomputed interest on some loans, customers had already been charged significant amounts of interest that the company did not refund.”

The enforcement action orders OneMain to adjust its cancellation policies to make them easier, and to double the applicable cancellation period for add-on products from 30 to 60 days. CFPB also ordered OneMain to “include interest in refunds after add-on product cancellations at any time.”

CFPB has ordered OneMain to pay $10 million in redress to consumers for improper charges, and an additional $10 million penalty to the Bureau to be deposited into its victims relief fund.

In a statement issued the same day the settlement was announced, OneMain said that it will abide by the terms of the order even though the company takes issue with some of the conclusions drawn by the CFPB.

“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. “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.”

The company also explained that it will expand the add-on cancellation period to 60 days, and said that “[m]any of the enhancements identified in the Consent Order have already been in place at OneMain for years, and the remainder have been completed, or are expected to be completed this year.”

The agreement will also lead OneMain to “extend the same refund method to all optional products customers who cancel, regardless of product type,” the company explained. “As a result, customers who cancel optional products will no longer receive refunds by check (except in states where the law requires it) but will instead receive credits to their statements, along with the removal of associated interest.”

This is the second major enforcement action to strike OneMain Financial within the span of one week. On May 25, the New York State’s Department of Financial Services announced that OneMain agreed to pay a $4.25 million penalty due to lapses in its cybersecurity controls by “failing to effectively manage third-party service provider risk, manage access privileges, and maintain a formal application security development methodology.”

Editor’s note: This story has been updated to include portions of a response statement by OneMain Financial.

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