Earlier last week, popular personal loan lender – OneMain Financial – was found to have engaged in deceptive and misleading lending practices.
The lender has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay $20 million in damages and penalties; Of which $10 million will go to affected borrowers.
Here’s what we know so far and what affected borrowers should do.
Recent research has revealed misleading lending methods
OneMain Financial, one of the nation’s largest personal loan lenders, has been accused of illegal sales and lending practices. According to the CFPBthe lender expected its employees to engage in deceptive sales methods, such as upselling and misleading borrowers about the need to purchase add-ons to get approved.
According to the CFPB’s press letter, employees were trained on upselling even after borrowers declined similar add-ons and could even lose their jobs if they didn’t upsell enough because they were “evaluated based on their sales percentage.”
The CFPB’s enforcement actions include mandatory refunds and changed policies
As a result of the investigation, OneMain is forced to adjust its policy to prevent a similar situation from occurring in the future. In addition to ceasing its unlawful lending practices, the lender is now required to double the cancellation period of an unused add-on from 30 to 60 days.
The $10 million in refunds to eligible customers includes the interest charged after the add-ons were canceled, and the remaining $10 million in penalties will go to the The CFPB Victim Assistance Fund.
OneMain accused of two primary wrongdoings
Through its investigation, the CFPB concluded that the lender defrauded borrowers and withheld repayments, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition on unfair practices.
Misleading borrowers about necessary purchases
Many consumers were led to believe by a company representative that they would not be approved for a loan unless they signed up for an optional product. In some cases, these products were added to the contract without informing the customer.
When the customer then asked for this additional product to be removed, it was reportedly a difficult process. In addition, some employees allegedly hid disclosures from borrowers, contradicting what was stated in the original disclosures.
Withhold refunds
OneMain has also come under fire for not adhering to its own ‘full refund policy’ and withholding money from those who would otherwise have qualified for the refund. As a result, the lender must now pay $10 million in damages to affected borrowers and another $10 million to the CFPB Victim Assistance Fund.
The lender allegedly told borrowers that they would be eligible for a full refund if they canceled the purchase of an add-on within the specified time.
Additionally, OneMain’s predetermined interest accrual on specific loans means customers were also charged non-refundable interest during the repayment period.
“OneMain pressured its employees to charge its loans with additional fees through false promises of easy cancellation with full repayment,” CFPB Director Rohit Chopra said in a press conference. “We are ordering OneMain to repay borrowers it defrauded and clean up its business practices.”
What affected borrowers should do
As of now, borrowers do not need to take any further action and should watch for new information from the CFPB or OneMain. Those affected will receive additional interest compensation from the lender in accordance with the agreed timeline with the CFPB.
If you believe you have been the victim of misleading or deceptive practices or would like to file a complaint about a lender’s products or services, call 855-411-CFPB(2372). You can also file a complaint via CFPB website.
If you are an employee (of OneMain or another financial institution) and believe that the company has violated CFPB regulatory standards or federal consumer laws, please send the information to whistleblower@cfpb.gov.
