The FTC announced this morning its has approved the final consent order with online student loan refinancer SoFi, which resolves the allegations around the SoFi’s deceptive advertising practices. Last October, the FTC issued a complaint stating that SoFi had been misrepresenting how much money student loan borrowers could save in its online, TV and direct mail advertisements since April 2016.
According to the FTC’s findings, SoFi would inflate the average lifetime savings consumers could achieve – sometimes even as much as double the actual savings – by excluding large categories of consumers. Meanwhile, most of the excluded groups were actually paying more money as a result of their loans with SoFi, the FTC said. In fact, they were paying thousands of dollars more, on average, on a lifetime basis, and hundreds more, on average, per month.
For example, one online SoFi ad had claimed: “Refinancing student loans saves $22,359 on average.” Another had said: “Start saving on your student loans. Average monthly savings $292.”
The excluded groups were those borrowers whose loans have a longer term than the previous student loans those consumers financed, the FTC explained. That meant they ended up paying more over the loans’ lifetime. When SoFi did make disclosures, it was buried in the fine print, the complaint also said.
In addition, the FTC said SoFi misrepresented when consumers would actually pay more under certain refinancing plans, which violated the FTC Act.
The Commission voted 5-0 to approve the final consent order, following a public comment period.
The order says SoFi is prohibited from misrepresenting to consumers how much they can saved using its products, and from making claims about savings unless they’re backed up with reliable evidence.
SoFi at the time had disputed the FTC’s claims, saying it offers “clear and complete information” to its current and prospective members.
In a statement released in October 2018, the FTC noted its resolution doesn’t require SoFi to pay any money for its violations, due to limitations in its authority. But if SoFi violates the consent order, the Consumer Financial Protection Bureau and the State Attorneys General would be able to seek penalties under existing federal law.
The order terminates on February 22, 2039 or 20 years from the most recent date the U.S. of the Commision files a complaint in federal court alleging any violations, whichever comes later.
The settlement comes at a time when student loan debt has become a hot button topic, having tripled over the last decade, and now surpassing auto and credit card debt, CNBC reported last fall. Average debt at graduation is now $30,000, up by $10,000 since the early ’90’s it said.
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