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New York and a dozen other states on Monday sued lender OneMain Financial, alleging it exploits customers with predatory practices.
New York Attorney General Letitia James is leading the bipartisan coalition behind the suit, which alleges that OneMain preys on consumers with poor credit by advertising itself as a lender that works with people in need, but adds pricey "and often useless" products like insurance policies to already expensive loans.
The coalition alleges these products are often added without consumers’ consent, or that customers are misled about the add-ons’ terms and costs, causing customers to pay hundreds or thousands of dollars more. Customers then refinance with even pricier loan packages to keep up with payments, the coalition claims.
"OneMain targets people who are already struggling financially, saddling them with hidden fees and misleading loans to trap them in even more debt. These predatory tactics are driving up costs for working families across New York and the country," James said in a news release.
The state, which filed the suit in the U.S. District Court in Manhattan, alleges that OneMain's lending practices violate consumer protection laws both federally and in New York, including state legislation that bans deceptive conduct and false advertising.
OneMain is a lender — but not a bank — with more than 1,300 branches around the country. Its offerings include credit insurance products that will pay off loans if the borrower dies or loses a job.
OneMain denied the states’ allegations in an emailed statement to Newsday, saying the suit "is wrong on the facts and wrong on the law and attempts to relitigate issues that were already reviewed by the Consumer Financial Protection Bureau and fully resolved.
"We operate honestly and transparently, in full compliance with all laws and regulations, as we provide responsible and much needed access to credit for hardworking Americans," the company said. "This matter does not change how we operate our business or serve our customers. We will litigate this case vigorously and look forward to proving the truth in court."
The lawsuit is seeking restitution for customers, along with penalties and a court order ordering OneMain to cease illegal lending practices.
The suit also asks that OneMain give up any profit made through illegal conduct, withdraw negative information reported to credit agencies that could impact consumer credit scores, and end any legal proceedings against customers related to OneMain add-on products.
Other states named as plaintiffs in the suit include Colorado, Maryland, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, Pennsylvania, South Dakota, Virginia, Washington and Wisconsin.
New York filed a similar suit against subprime auto lender Credit Acceptance Corp. in 2023 for allegedly pushing expensive loans on to low-income customers without considering their ability to repay the debt. The suit is ongoing.
Brianne Ledda covers personal finance and affordability for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.
