NEW YORK — A coalition of 12 state attorneys general has filed a lawsuit against OneMain Financial, alleging the lender misled tens of thousands of borrowers and trapped them in high-cost loans through hidden fees and add-on products.
The lawsuit claims OneMain, one of the largest non-bank installment lenders in the United States, loaded loans with costly insurance and membership products—often without borrowers’ knowledge or through misleading disclosures—driving up the cost of loans by hundreds or even thousands of dollars, according to the office of New York Attorney General Letitia James.
“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 in a statement released by her office. “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.”
The Allegations
According to the New York Attorney General’s Office, OneMain operates more than 1,300 branches across 44 states and markets itself as a lender serving consumers who may have difficulty obtaining credit elsewhere.
The lawsuit alleges the company frequently adds expensive products to loans, including:
- Credit insurance products that claim to pay off loans if borrowers die, lose their jobs, or become injured.
- Non-credit products, such as home and auto membership clubs.
- Investigators allege the lender sometimes included these products in loans without customers’ consent or buried the disclosures in extensive paperwork while rushing borrowers through the closing process.
- If customers declined the add-ons or questioned them, OneMain employees allegedly pressured borrowers to accept them. In some cases, the lawsuit claims, customers were charged for add-on products even after declining them.
Unaware of True Costs
The attorney general’s office said borrowers were often unaware of the true cost of the products because the company allegedly did not disclose how much the add-ons would cost once interest was applied until after the loan was finalized.
As a result, borrowers sometimes paid more for the add-on products than for the amount they borrowed, the attorneys general said in a statement.
State officials also allege the company’s practices pushed borrowers into repeated refinancing, with new add-on products attached each time, creating a cycle of increasing debt.
What’s Being Sought
In the lawsuit, the attorneys general are seeking:
- Restitution for consumers allegedly charged for unwanted products
- Civil penalties and disgorgement of unlawful profits
- Court orders halting the alleged practices
- Removal of negative credit reporting tied to the add-on products
- Dismissal of legal actions related to the disputed charges
The bipartisan group of attorneys general includes Colorado, Maryland, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, South Dakota, Virginia, Washington and Wisconsin.
OneMain Financial said it disputes the claims and will vigorously defend itself.
