OneMain Financial faces federal lawsuit over hidden fees
Thirteen state attorneys general have filed a bipartisan federal lawsuit against OneMain Financial, one of the nation's largest non-bank installment lenders, PBS reported.
The case targets practices affecting borrowers across the company's extensive national network.
The coalition alleges the Indiana-based lender included insurance products and membership programs in loan paperwork without borrowers' clear consent. Officials say consumers may have unknowingly paid for products they never intended to buy.
States claim that tens of thousands of borrowers were affected and that they are pursuing hundreds of millions in restitution, penalties, and forfeited profits. The lawsuit follows another major enforcement action over similar allegations just three years ago.
What 13 attorneys general allege OneMain did to borrowers
The lawsuit was filed on March 16 in the Southern District of New York, accusing OneMain of a practice commonly referred to as "loan packing."
Borrowers came in seeking straightforward installment loans, but the company allegedly bundled credit insurance, roadside assistance, and home membership programs into each deal.
OneMain owns these add-on products through affiliated entities, which means the lender profits from both the loan itself and the extras attached to it.
OneMain "targets people who are already struggling financially" and traps them with hidden fees and misleading loan terms, New York Attorney General Letitia James said, according to PBS.
Employees allegedly rushed consumers through 50 pages of dense loan documents, often on smartphone screens where the fine print shrank to an unreadable size.
The company also pressured branch staff through internal incentives to attach as many add-on products as possible to each consumer's loan agreement, the complaint states.
Borrowers who tried to refuse the extras reportedly had to decline the products three times before a branch employee would remove them from the paperwork, GetOutofDebtGuy indicated.
OneMain already paid $20 million in 2023 for similar allegations
In 2023, the Consumer Financial Protection Bureau ordered OneMain to pay $20 million over related allegations involving deceptive add-on product sales and failed refund processes, Investopedia confirmed.
That settlement required OneMain to refund $10 million to roughly 25,000 consumers who had been charged interest on canceled add-on products during a supposed full refund window.
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The bureau found that some employees added products to loan documents without telling borrowers, a tactic the company's own staff internally called "pre-packing."
Staff were pressured to "load up" consumer loans with extra charges through false promises of easy cancellation, then-CFPB Director Rohit Chopra said at the time.
The new multistate lawsuit suggests the behavior continued despite that federal penalty, which OneMain has characterized as fully resolved three years ago.
OneMain denies the allegations and vows to fight in court
OneMain has pushed back forcefully against the multistate lawsuit, dismissing the allegations and arguing the case revisits issues already settled by federal regulators.
They called the states' claims factually and legally wrong, saying they will contest the lawsuit aggressively and expect the legal process to validate their position.
OneMain also emphasized that the refund issues addressed in its 2023 consent order with the CFPB affected fewer than 1% of the company's total customer base.
Its defense raises a central legal question: whether a prior federal settlement can shield a lender from separate state-level enforcement actions over similar conduct.
What the coalition wants the court to do about OneMain's lending
The attorneys general are seeking relief that goes well beyond financial penalties, targeting how OneMain structures and sells its loan products to borrowers across the country.
Requested remedies include full restitution to consumers, civil penalties under each state's consumer protection laws, and disgorgement of all profits tied to the add-on products.
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.
They also want a court order to stop the practices entirely and require OneMain to remove any negative credit reporting linked to the disputed add-on charges.
The coalition is also seeking a court order to abandon any legal proceedings OneMain has filed against customers tied to disputed add-on charges, according to the Virginia AG's office.
Pennsylvania and New York co-led the case, with attorneys general from Colorado, Maryland, Nevada, New Hampshire, New Jersey, and six additional states joining the coalition.
How loan packing costs OneMain borrowers with subprime credit even more
Loan packing inflates the total amount financed, raising the monthly payment and the overall interest a borrower pays across the full term of the loan.
In New Jersey, affected borrowers paid an average of roughly $826 in add-on charges they did not agree to purchase, the complaint estimates.
Across all 13 states, total alleged damages run into the hundreds of millions of dollars, reflecting years of accumulated overcharges on consumer installment loans.
For consumers already under financial pressure, those added costs can make it harder to keep up with payments and increase the risk of default or collections.
The CFPB received 880 complaints about OneMain's personal loans in 2024, with many citing unexpected fees and issues with add-on products, U.S. News reported.
Related: Mortgage refinances tumble as high rates quash borrower savings
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This story was originally published June 8, 2026 at 10:23 AM.