Consumer Finance Report–OneMain Did It All Wrong

Occasionally, a consumer finance company does business in a fashion that results in its getting into hot water. OneMain Financial provided a textbook example of just what not to do.

The CFPB went after OneMain for its deceptive and abusive practices. OneMain was ordered to pay $20 million in compensatory damages and penalties for its business conduct. The list of such
practices includes:

• deceiving customers by telling them that loans could not be obtained without add-on products
• promising customers that such products could be cancelled within 30 days, but then making it difficult to cancel
• when ancillary products were cancelled, the precomputed finance charges related to the cost of such products were not refunded
• pushing its CSRs to upsell borrowers on every loan, incentivizing them to do so and even firing those who did not upsell enough.

I have spoken often about the danger of “pre-packing” loan and sales contracts. Pre-packing is the practice of filling out the contract form including ancillaries before obtaining the approval of the
consumer to such products, and then making it trying to rewrite the contract—feigning the difficulty to do so. This is apparently what the OneMain CSRs were doing—either by training or self-motivation. In any event, the CFPB said that enough is enough.

Some 25,000 customers were identified as being adversely affected by OneMain’s unfair, deceptive, and abusive practices. Clearly, there is a lesson for us to be learned here. Don’t behave like OneMain.

Maurice L. Shevin

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