By Hank Russell
Attorney General Letitia James and a bipartisan coalition of 12 other attorneys general filed a lawsuit against OneMain Financial for illegally misleading its customers and trapping tens of thousands of borrowers in expensive loans with hidden costs. Joining James in this lawsuit are the attorneys general of Colorado, Maryland, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, South Dakota, Virginia, Washington, and Wisconsin.
James and the coalition allege that OneMain exploits its vulnerable customers by loading their already high-cost loans with expensive and often useless additional products like insurance policies that claim to pay the loan off if consumers die, lose their jobs, or are injured, as well as non-credit products like home and auto membership clubs.
OneMain adds these products to consumers’ loans without their knowledge or by misleading them about the products’ terms and costs, according to the AGs. As a result, customers are charged hundreds or thousands of dollars more for their loans than they expect.
The lawsuit contends that the lender keeps its consumers in a vicious cycle by forcing them to refinance into more expensive loan packages in order to keep up with payments to OneMain, at which point the lender misleads them again and packs more products into their loans.
James said tens of thousands of New Yorkers have been taken advantage of by the company.
“OneMain targets people who are already struggling financially, saddling them with hidden fees and misleading loans to trap them in even more debt,” James said. “These predatory tactics are driving up costs for working families across New York and the country. Today I am taking action to stop OneMain’s illegal and abusive business model and get New Yorkers their money back.”
In addition, OneMain buries the terms and conditions of these products in a stack of paperwork and rushes consumers through the loan closing to ensure that they do not understand what is in their loans, according to the AGs. If borrowers refuse these add-ons or express concerns, OneMain employees pressure them to accept the terms. In some cases, OneMain charges the consumer for add-ons even if they decline them. As a result, customers are left with loan terms they do not understand and end up paying for products they do not want, have any use for, or even know they have.
When customers do learn about the add-on products, OneMain misleads them about the cost, the AGs claim. OneMain never tells the customer how much the add-on products will cost once interest is applied until after the loan has been closed. The products are expensive, often costing customers hundreds or thousands of dollars more than they expect to pay. Sometimes, customers are even charged more for these add-on products than they are for the money they borrow.
James and the coalition allege that OneMain’s practices violate state and federal consumer protection laws, including New York’s laws against illegal, fraudulent, deceptive, unfair, and abusive conduct and false advertising. With this lawsuit, the AGs are seeking restitution for consumers who were unlawfully charged for these products, penalties, and disgorgement of all unlawful profits.
The lawsuit also seeks a court order preventing OneMain from continuing its illegal practices and ordering the lender to withdraw any negative information reported to credit agencies that may affect its customers’ credit scores and to abandon any legal proceedings against customers related to their add-on products.
In response to the lawsuit, OneMain said in a statement, “The states’ allegations are simply untrue — their case is wrong on the facts and wrong on the law and attempts to relitigate issues that were already reviewed by the Consumer Financial Protection Bureau and fully 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. This matter does not change how we operate our business or serve our customers. We will litigate this case vigorously and look forward to proving the truth in court.”