US State Attorneys General Sue HUD and OneMain Over Lending Compliance and Misleading Sales
The Fair Housing Act of 1968 prohibits housing discrimination based on seven protected characteristics, including race, sex and disability. HUD also funds state and local enforcement agencies through the Fair Housing Assistance Program. OneMain Financial provides installment loans to borrowers with weaker credit. On May 31, 2023, the CFPB ordered it to pay at least $10 million in consumer redress and a $10 million penalty, underscoring the consumer-protection links between fair-housing enforcement and subprime-lending oversight.
On March 16, 2026, California and Illinois led 16 attorneys general in suing HUD to block September 2025 guidance that they said sought to force local agencies to scale back enforcement by threatening to revoke certifications, halt referrals and cut off funding. The same day, New York led 13 attorneys general in suing OneMain, alleging that it saddled tens of thousands of borrowers with insurance and membership products they had not agreed to buy. The add-ons cost each borrower hundreds to thousands of dollars and totaled hundreds of millions of dollars. The lawsuit seeks refunds, penalties and disgorgement of ill-gotten gains.
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The history behind this eventDemocratic Attorneys General Sue HUD Over Fair Housing Curbs
The Fair Housing Act bars discrimination in housing sales, rentals and mortgage lending on seven federally protected grounds: race, color, national origin, religion, sex, disability and familial status. Since 1980, HUD’s Fair Housing Assistance Program, or FHAP, has funded and referred complaints to state and local agencies whose laws are deemed substantially equivalent. The dispute matters because many states protect additional classes, and a narrower federal test could curb their capacity to scrutinize mortgage lenders and other housing providers under state fair-lending and anti-discrimination rules.
California Attorney General Rob Bonta and Illinois Attorney General Kwame Raoul led 16 Democratic attorneys general in suing HUD in the U.S. District Court for the Northern District of California on March 16, 2026. They challenged September 2025 guidance that threatens decertification, lost referrals and funding for agencies enforcing protections beyond the federal list, including sexual orientation, gender identity, language, criminal records and source of income. The plaintiffs also say it unlawfully restricts disparate-impact claims. Their agencies received about $10.7 million through FHAP in fiscal 2024; Bonta said California alone could lose roughly $3 million.
13 U.S. States Sue OneMain Financial Over Allegedly Illegal Loan Fees
OneMain Financial is a major U.S. nonbank installment lender serving primarily subprime borrowers. The Consumer Financial Protection Bureau ordered the company on May 31, 2023, to refund $10 million and pay a $10 million penalty over the sale of add-on products. The new case again highlights risks surrounding protections for vulnerable borrowers and oversight of nonbank lenders.
On March 16, 2026, a 13-state coalition led by New York Attorney General Letitia James sued OneMain in federal court in Manhattan. The lawsuit alleges that the lender bundled credit insurance and home and auto membership services into loans, causing tens of thousands of borrowers to pay hundreds or thousands of dollars extra and generating hundreds of millions of dollars in fees and interest. The states are seeking compensation, disgorgement and an end to the alleged unlawful conduct. OneMain denied the allegations, saying the issues had already been addressed by the CFPB.
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