The Consumer Financial Protection Bureau (CFPB) ordered OneMain Financial (OneMain) to pay $20 million for failing to refund interest charged to 25,000 customers who cancelled purchases within the full refund period and for deceiving borrowers about the need to purchase add-on products to receive a loan. OneMain must pay $10 million in refunds to affected consumers, as well as a $10 million penalty to the CFPB’s Victim Relief Fund.
The Details
OneMain is a nonbank personal loan installment lender with a nationwide network of more than 1,400 branches across 44 states. The company provides loans as well as add-on products such as roadside assistance, credit life insurance, credit disability insurance, and identity theft coverage.
Key CFPB Findings:
- The Bureau determined that OneMain employees engaged in “high-pressure sales tactics” and that the company incentivized its employees to upsell add-on products to customers.
- The sales tactics engaged by OneMain employees, combined with the practice of highly incentivizing employees based on the number of add-on products added to a loan, resulted in employee conduct that amounted to tricking borrowers into purchasing optional add-on products or adding such products to a loan without the borrower’s knowledge.
- The Bureau’s consent order took exception to OneMain representing in marketing and sales presentations that add-on products came with a full refund period but then, with respect to non-credit-insurance add-ons, failing to refund the interest associated with the purchase price of the add-on product when a borrower canceled the add-on product during the full refund period and the lender refunded the add-on product’s purchase price.
- The amount of harm to the consumer was exacerbated in some instances by OneMain precomputing interest on the consumer’s loan with the interest being calculated based on the principal amount of the loan and the purchase price of the non-credit-insurance add-on products added to the loan.
Interestingly, the Consent Order appears to indicate that the add-on products, credit-insurance and non-credit-insurance, that were the focus of the CFPB’s consent order constitute consumer financial products or services as defined by Dodd-Frank.
As a result of these practices, OneMain was ordered to pay a civil penalty of $10 million and provide consumer redress for the failure to refund the interest associated with an add-on purchase price – an amount that is expected to be, at a minimum, an additional $10 million. Additionally, going forward OneMain is required under the consent order to provide new disclosures to consumers regarding the add-on products at issue and the costs associated with the same. Significantly, the CFPB is requiring that OneMain facilitate a 60-day full refund period on all Optional Add-On Products as that term is defined under the consent order, irrespective of any existing full refund period required by state or federal law. Further, the consent order provides that in addition to the interest required to be refunded during the full refund period, OneMain must also refund any interest attributable to the refund of the unearned premium subsequent to the full refund period. Finally, the consent order indicates that a cancellation for an add-on product due to a determination that the consumer was ineligible for the add-on product must be treated as if the cancellation was made during the full refund period.
This consent order is a significant development with respect to the CFPB exercising its authority in the add-on product space. While OneMain is a uniquely situated lender whose loan structure is not common among F&I Sentinel’s partners, please let us know if you would like to schedule a conversation to discuss the consent order and how your company chooses to react, if at all.
