In the wake of taking action against SoFi for allegedly lying in its ads about how much borrowers can save by refinancing their student loans with the online lender, the Federal Trade Commission is also warning other lenders to not engage in similar activity.
On Monday, the FTC accused SoFi of using its television, print, and online ads to mislead consumers about the effectiveness of the lender’s loan refinancing programs, claiming that SoFi deceptively inflated how much borrowers can save by as much as 200% in some cases.
And according to the FTC, there are other lenders making similar savings claims and the FTC wants to make sure that those lenders are not making “false or unsubstantiated representations” to borrowers.
To that end, the FTC is sending letters to an unknown number of lenders, warning them that they may be subject to a regulatory action should they be found to be engaging in false advertising.
“We understand you also have made savings claims in your advertising for loan refinance products, so we want to call your attention to the SoFi case,” the FTC says in its letter (which can be read in full here).
“We strongly recommend that you review your own company’s advertising claims to make sure you are not making false or unsubstantiated representations, including claims like the ones that led to our lawsuit against SoFi,” the FTC continued. “The FTC may take action to enforce and seek redress for any violations of the FTC Act as the public interest may require.”
The FTC did not disclose which lenders received the letter, but the letter makes it clear what conduct the FTC views as unseemly.
From the FTC’s letter:
According to our lawsuit against SoFi, the company violated the FTC Act by making deceptive claims that its members saved specific large average amounts of money, either over the lifetime of their loans or on a monthly basis. We allege that, in numerous instances, SoFi’s claims inflated the average savings consumers actually achieved by selectively excluding large categories of consumers based on the term length of their loans. Furthermore, we allege that, in numerous instances, SoFi only revealed these exclusions in fine print disclaimers insufficient to cure the prominent deceptive claims. Additionally, our complaint alleges that after some consumers prequalified for a loan online, SoFi misrepresented that they would save “$0.00” under certain loan options when, in fact, consumers would actually have to pay more money.
The proposed settlement between SoFi and the FTC prohibits SoFi from making false or unsubstantiated claims about how much consumers have saved or will save over any length of time.
And now, other lenders may be facing similar restrictions should they be found to be violating federal law.
To read the FTC’s letter in full, click here.