For more than two years, SoFi has been making misleading claims in its television, print, and online advertisements and lying about the amount of savings its loan refinancing programs would bring to borrowers, the Federal Trade Commission said Monday.
In a formal complaint, the FTC accused SoFi of inflating the amount of savings borrowers could achieve by refinancing their student loans with the online lender, which is one of the nation’s largest student loan companies as well as a burgeoning mortgage lender.
According to the FTC, since at least April 2016, SoFi “deceptively advertised inflated figures” about student loan refinances, basically claiming that it could save borrowers far more than is actually the case.
The FTC said that in one online ad, SoFi claimed “Refinancing student loans saves $22,359 on average,” and another ad told readers to “Start saving on your student loans. Average monthly savings $292.”
The FTC’s complaint states that SoFi’s ads overinflated the actual savings amount by as much as 200% in some cases, by excluding large segments of customers from its calculations.
According to the FTC, when SoFi’s ads made claims about lifetime savings, the ads excluded borrowers whose newly refinanced loans have a longer term than their previous student loans.
The FTC stated that those borrowers typically end up paying much more money over the lifetime of their loan, thousands of dollars more, on average. But those borrowers were excluded from the population SoFi used to make its claims.
According to the FTC, when SoFi did disclose those exclusions, they were “buried in fine print.”
In other cases, SoFi allegedly misrepresented when consumers would actually pay more under certain refinancing plans.
“Consumers who visited SoFi’s website and were pre-approved for a loan were often directed to a webpage that displayed the loan options for which they prequalified,” the FTC said. “The complaint alleges that the web page misrepresented loan options for which consumers would pay more on a monthly basis or over the lifetime of the loan – by falsely stating that consumers’ lifetime or monthly savings would be ‘0.00.’”
The FTC alleges that those claims violate federal law.
According to the FTC, SoFi has agreed to a tentative settlement and will stop misrepresenting the amount of savings garnered through its loan refinancing programs.
The tentative agreement with SoFi also prohibits the company from misrepresenting much money consumers will save or have saved using SoFi’s products and from making any claims about any such savings, “unless they are backed up with reliable evidence.”
There are no monetary penalties associated with the action, although the FTC said that once the settlement is finalized, SoFi could face civil penalties if it violates the terms of the agreement.
As it turns out, the FTC is not allowed to take monetary action against SoFi in this case, a fact lamented by FTC Commissioner Rohit Chopra, who used to be the student loan ombudsman at the Consumer Financial Protection Bureau.
Chopra, a former member of Hillary Clinton’s transition team and a former Obama administration official, issued a statement suggesting that the CFPB and state attorneys general would be able to take action against SoFi for the false advertising.
“According to the FTC’s complaint, SoFi’s widely disseminated advertisements have significantly exaggerated the average savings that student loan borrowers achieve when they refinance through the company,” Chopra said in his statement.
“These advertisements were deceptive and I agree that SoFi’s actions were unlawful, so I have voted in favor. Our proposed resolution does not require SoFi to pay any money whatsoever for this misconduct,” Chopra continued.
“Ideally, SoFi would pay civil penalties for violating the law. Due to limitations in the FTC’s authority, the agency cannot seek civil penalties in matters like these. However, the Consumer Financial Protection Bureau and the State Attorneys General would be able to seek penalties from SoFi under existing federal law,” Chopra said.
Chopra added in future situations like these, the FTC should “carefully consider whether partnering with other law enforcement agencies can lead to better results for consumers and deter bad actors from violating the law.”
In a statement provided to HousingWire, SoFi said that its glad it can move past this situation.
“We have always been committed to giving our current and prospective members clear and complete information with which to make smart financial choices, and are pleased to have this matter resolved,” a SoFi spokesperson said.