OneMain Faces Multi-State Lawsuit Over Alleged Hidden Loan Costs

Shares of OneMain Holdings, Inc. OMF lost 5.4% yesterday after a coalition of state attorneys general filed a lawsuit against the firm, alleging deceptive lending practices that increased borrowing costs for consumers.

OMF Alleged of Deceptive Add-Ons

A bipartisan group of 13 state attorneys general accused OneMain of steering borrowers toward costly add-on products, including credit insurance and membership services similar to AAA. According to the complaint, these products were often presented as necessary or beneficial, with misleading explanations regarding their cost, necessity, and cancellation terms.

The lawsuit claims that, in some cases, these add-ons were included without borrowers’ full knowledge, while others were rushed through the loan closing process without adequate time for review. Additionally, OneMain allegedly failed to verify whether borrowers already had similar services, further inflating loan costs unnecessarily.

The attorneys general argue that these practices disproportionately affected financially vulnerable individuals, particularly those with subprime credit scores who form a significant portion of OneMain’s customer base. Officials, including New York Attorney General Letitia James, stated that such tactics trapped borrowers in deeper debt through hidden fees and misleading loan structures.

The coalition is seeking consumer restitution, financial penalties, and the disgorgement of alleged unlawful profits. It also aims to secure a court order preventing the continuation of these practices and requiring the company to correct negative credit reporting tied to the disputed products.

OneMain’s Pushback & Past Settlement

OneMain has strongly denied the allegations, calling the lawsuit meritless and asserting that it intends to vigorously defend itself in court.

The company emphasized that similar issues were already addressed in a 2023 settlement with the Consumer Financial Protection Bureau, where OMF paid $20 million in redress and penalties related to alleged deceptive sales practices.

OMF’s Price Performance & Zacks Rank

In the past three months, OMF shares have lost 28% compared with the industry’s 23.5% decline.

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Currently, OneMain carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Legal Troubles for Other Finance Firms

A few days back, a lawsuit was filed in New York state court by Western Alliance Bancorporation WAL against Jefferies Financial Group JEF, alleging JEF’s breach of contract and fraud related to a $126.4-million loan tied to the collapse of First Brands Group.

Western Alliance claimed that Jefferies failed to complete payments on a loan extended to the Point Bonita fund, an affiliate investment vehicle linked to Jefferies. The loan was backed by receivables purchased from First Brands.

First Brands is an auto-parts distributor that filed for bankruptcy in September 2025 amid allegations of fraud. After the company’s collapse, the receivables backing the loan reportedly became worthless, worsening the dispute between the lender and Jefferies.

Jefferies informed that it would not make the remaining payments due in early 2026, leaving $126.4 million unpaid. The lawsuit alleged that Jefferies and its affiliates breached the loan agreement and misrepresented their intention to repay the debt. Western Alliance claimed the defendants “knew they did not intend to repay the loan in full,” which led the bank to charge off the entire remaining balance.

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Jefferies Financial Group Inc. (JEF): Free Stock Analysis Report

Western Alliance Bancorporation (WAL): Free Stock Analysis Report

OneMain Holdings, Inc. (OMF): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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