Company's illegal practices defrauded 25,000 borrowers
Installment lender OneMain Financial is being ordered to pay a $20 million penalty for using deceptive practices to profit from add-on products and for refusing to provide promised refunds to consumers.
A Consumer Financial Protection Bureau (CFPB) investigation found that the company repeatedly deceived consumers into believing that certain add-on products were required for loan approval. When some customers later asked for refunds - which OneMain claimed were guaranteed - the company then kept a portion of the funds. The CFPB says as many as 25,000 borrowers were defrauded as a result of these practices.
“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. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”
According to the CFPB, OneMain expected its employees to upsell borrowers on every loan. 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 of the investigation and subsequent enforcement action, OneMain will provide $10 million in refunds to defrauded consumers. The company will also pay a $10 million penalty to the CFPB.
The enforcement action also requires OneMain to update its cancellation and refund policies and to extend the refund period from 30 days to 60 days.