Loan company to pay $20 million over sales practices
OneMain Financial, a major national company that specializes in making personal and auto loans to consumers with blemished credit, has been ordered to pay $20 million in fines and refunds for engaging in “deceptive sales practices.”
The company, with branches in New Hampshire and Maine, agreed to the fine and refunds in a settlement with the Consumer Financial Protection Bureau, which found the company failed to properly refund interest charges to 25,000 customers.
The CFPB also found the company deceptively “upsold” borrowers add-on products, such as identity theft protection and roadside assistance.
OneMain, which describes itself as “the leader in offering nonprime customers responsible access to credit,” operates six branches in New Hampshire and four in Maine, among other locations, according to the company website.
“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 a press release issued last week. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”
OneMain failed to refund interest charges to customers who canceled add-on purchases within a purported “full refund period,” generally 30 days, the press release says.
OneMain will pay $10 million in refunds to those consumers and an additional $10 million penalty to the CFPB’s victims relief fund, the press release says.
In all, the company has 1,400 branches across 44 states. It is one of the largest nondepository personal installment lenders in the country, according to the CFPB. Its publicly traded shares are valued at about $4.9 billion.
‘OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds.’ ROHIT CHOPRA Director of the Consumer Financial Protection Bureau, in a press release
OneMain offers personal loans with interest rates ranging from 18 percent to 36 percent, according to LendingTree, an online lending marketplace.
OneMain consented to the CFPB agreement “in the interest of compliance and resolution of the matter, and without admitting or denying any wrongdoing,” the consent agreement says.
In a statement posted online, the company 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,” adding that the refunds will go to a very small percentage of its customers.
The company also said many of the policy changes cited in the consent agreement “have already been in place at OneMain for years, and the remainder have been completed, or are expected to be completed this year.”
According to the CFPB, the company expected its employees to upsell borrowers with add-ons 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,” the CFPB press release reads. “Salespeople were evaluated on the basis of their sales rate and could even be fired if they did not upsell enough.”
OneMain “tricked borrowers into signing up for optional products” by leading them to believe that they could not receive a loan without signing up for an add-on product, the CFPB says.
“Some 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,’” it says.
If the consumer asked for the removal of add-ons, “employees were expected to make it seem difficult to remove the products,” the CFPB press release says. “In other cases, employees obscured written disclosures from consumers’ view, or verbally contradicted them.”
The agreement requires OneMain to 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 to 60 days; and include interest in refunds after add-on product cancellations, the press release says.