Last week, attorneys general from 13 states filed a federal lawsuit in the Southern District of New York against OneMain Financial (OneMain) and affiliated companies, alleging deceptive and unfair practices related to the sale of its loan “add-on” products.
Led by New York Attorney General Letitia James, the multistate coalition asserts that OneMain’s practices violate the federal Consumer Financial Protection Act (CFPA) and state consumer protection and banking laws. The case serves as an important reminder that while the CFPB’s enforcement activity has waned during the Trump administration, the states continue to have the ability to enforce the CFPA, and certain states are willing to try and fill the enforcement gap left by the CFPB’s retreat.
Link to Alleged Deceptive Loan Add-On Practices Alleged Deceptive Loan Add-On Practices
The complaint alleges that OneMain offered these optional add-on products, such as credit insurance and membership services, and incorporated their cost into the loan principal, resulting in undisclosed interest charges for the add-ons. In some cases, the complaint alleges, OneMain added these products without borrowers’ consent, charging customers for add-ons even after they declined them.
The complaint further alleges that add-on products were introduced late in the closing process, with loan documents failing to disclose their full cost over the life of the loan. Employees allegedly used high-pressure tactics, including suggesting that loans might be unavailable or delayed if borrowers refused the add-ons, and borrowers were not given a practical opportunity to review terms or compare alternatives.
The states also allege that add-on costs drove some borrowers to refinance—at which point OneMain allegedly repeated the same sales practices, layering new add-ons into the refinanced loan. Employees were allegedly incentivized through commissions and performance metrics tied to add-on sales, and consumer complaints reflected difficulty understanding and using the products.
Link to State AG Enforcement and CFPB Context State AG Enforcement and CFPB Context
The states’ lawsuit follows a 2023 enforcement action by the CFPB involving similar allegations related to OneMain’s add-on products. To resolve that matter, OneMain agreed to pay approximately $20 million in redress and penalties. The state AGs, by contrast, appear to challenge OneMain’s broader add-on sales model—including how products are presented, financed into loans, and incentivized—and are seeking restitution, penalties, and injunctive relief. OneMain has stated that the conduct at issue in the state AG lawsuit was previously reviewed and “fully resolved” through the CFPB settlement.
The action reflects continued scrutiny of add-on products and the adequacy of disclosure in consumer lending.
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