NEW YORK— A bipartisan coalition of 13 state attorneys general has sued OneMain Financial, alleging the installment lender saddled subprime and other financially vulnerable borrowers with hundreds of millions of dollars in hidden costs by packing loans with costly “add-on” products customers often did not knowingly request or need, according to Reuters.
The lawsuit, filed in federal court in Manhattan, targets one of the nation’s largest nonbank consumer lenders and accuses it of using deceptive sales practices to inflate borrowing costs for already cash-strapped consumers.
According to Reuters, the complaint alleges OneMain used commissions and gift cards to incentivize loan closers, branch managers and district managers to push what the states described as “extremely expensive” credit insurance, term life insurance and lifestyle- or health-related membership plans during loan closings. The states contend borrowers were often rushed through paperwork and pressured to accept the products unless they explicitly declined multiple times, leaving many consumers paying hundreds or even thousands of dollars more over the life of their loans.
New York Attorney General Letitia James, joined by Pennsylvania Attorney General David Sunday and 11 other attorneys general, is seeking restitution for consumers, civil penalties, disgorgement of profits and a court order barring the alleged practices. State officials said the products were frequently hidden in lengthy closing documents or misrepresented as necessary or beneficial, while generating substantial revenue for OneMain at the expense of borrowers already struggling to access affordable credit.
The lawsuit also revives issues that drew federal scrutiny in 2023, when the Consumer Financial Protection Bureau ordered OneMain to pay $20 million over allegations it deceived borrowers into believing they needed to buy optional add-on products to obtain loans and failed to properly refund interest charges after some products were canceled. That order required $10 million in consumer refunds and a $10 million civil penalty, though OneMain did not admit wrongdoing, Reuters explained.
OneMain, based in Indiana, said it disputes the new allegations and intends to fight the case, arguing the practices at issue were already addressed in the CFPB settlement, Reuters reported.