By Jonathan Stempel
NEW YORK, March 16 (Reuters) – A bipartisan group of 13 U.S. state attorneys general sued OneMain on Monday, accusing the subprime lender of charging cash-strapped borrowers hundreds or thousands of dollars for “add-on” products they did not request and do not need, saddling them with hundreds of millions of dollars in extra costs.
Shares of OneMain fell more than 9% in afternoon trading after the lawsuit was filed.
In a complaint filed in Manhattan federal court, attorneys general led by New York’s Letitia James and Pennsylvania’s David Sunday said OneMain rewards loan closers, branch managers and district managers with commissions and gift cards for selling “extremely expensive” credit insurance, term life insurance, and lifestyle- and health-related membership plans that have little value.
The attorneys general said OneMain instructs employees to wait until borrowers are ready to close their loans to pressure them into buying add-ons, and not to back off unless borrowers say “no” three times. They also said employees rush the closing process before borrowers understand the fine print.
“OneMain’s unlawful add-on and refinancing practices leave many of its customers significantly worse off than they bargained for when they came to the company for financial relief,” the complaint said.
The Evansville, Indiana-based company lends to people who may otherwise have limited access to credit.
ONEMAIN CALLS ALLEGATIONS ‘SIMPLY UNTRUE’
OneMain agreed in May 2023 to pay $20 million to settle U.S. Consumer Financial Protection Bureau charges that it pressured employees to sell add-ons to meet sales targets, tricked borrowers into buying add-ons, and failed to refund interest to borrowers who cancelled. It did not admit or deny wrongdoing.
In a statement, OneMain called the states’ allegations “simply untrue” and an attempt to relitigate issues the CFPB resolved.
“We operate honestly and transparently, in full compliance with all laws and regulations, as we provide responsible and much needed access to credit for hardworking Americans,” OneMain said. “We will litigate this case vigorously and look forward to proving the truth in court.”
The states are seeking civil fines, restitution to customers and the forfeiture of illegal profit for alleged violations of the Consumer Financial Protection Act of 2010, part of the Dodd-Frank financial reforms, and state consumer protection laws.
Other states joining the lawsuit are Colorado, Maryland, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, South Dakota, Virginia, Washington and Wisconsin.
OneMain was once owned by Citigroup, which sold it in 2015.
(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Nia Williams)
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