Unethical sales tactics, in part, resulted in the CFPB enforcement action. For example, OneMain’s “written training materials directed employees to attempt to sell optional add-on products to consumers even when the employees [thought] the consumer [would] not want them, or the consumer previously declined optional add-on products when obtaining a prior loan,” the consent order stated.
Additionally, individual sales employees’ performance reviews were based, in part, on their coverages-per-loan (CPL) rate. According to some of OneMain’s former employees, “low CPL rates could lead to adverse employment consequences, including termination,” the order stated.
Deceitful Sales Tactics
According to the CFPB order, some of OneMain’s former employees explained that “a common method of selling optional add-on products was adding them onto a loan before showing the paperwork to the consumer (referred to by some former employees as “pre-packing”) and without verbally informing the consumer that the products were included or optional.”
“If the consumer identified the products and asked for their removal, employees were expected to make it seem difficult to remove the products,” the order stated. In other instances, “employees obscured written disclosures from consumers’ view or verbally contradicted them,” according to the order.
Fraudulent Refund Policy
The CFPB also found that OneMain “kept $10 million in interest charges despite its ‘full refund’ policy.” OneMain told borrowers they would receive a “full refund” on add-on purchases if they cancelled within a certain period, between 30 and 45 days.
“However, OneMain unfairly failed to refund interest charges for about 25,000 borrowers who signed up for add-ons—such as roadside assistance benefits, identity theft protection, or entertainment discounts,” the CFPB said. “Because of how OneMain precomputed interest on some loans, customers had already been charged significant amounts of interest that the company did not refund.”
Over the past four years, OneMain kept approximately $10 million in interest charges attributable to add-ons cancelled within its purported full refund period. Moreover, these practices violated the Consumer Financial Protection Act’s prohibition on unfair practices and amounted to a fraudulent refund policy, the CFPB said.
Settlement Details
OneMain will pay $10 million in consumer redress and an additional $10 million penalty to the CFPB’s victims’ relief fund. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices,” said CFPB Director Rohit Chopra.
In addition to the $20 million in redress and penalties, the CFPB also ordered OneMain to take measures to ensure future compliance. Specifically, OneMain must “stop its unlawful activities, adjust its policies to make cancellation of add-on products easier, double the period in which a consumer can cancel an unused add-on product without cost from 30 to 60 days, and include interest in refunds after add-on product cancellations at any time,” according to the CFPB’s order. 
PHOTO: BY TONY WEBSTER, USED UNDER LICENSE, CC-BY-2.0
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.