Deal Final in FTC’s Action Against Online Lender

Financial Services Law

The Federal Trade Commission (FTC) has finalized its deal with SoFi, an online lender that the agency had accused of making false statements about student loan refinancing.

According to the FTC, the California-based personal finance company misrepresented how much money student loan borrowers have saved or could save by refinancing.

What happened

Since at least April 2016, SoFi made “prominent, unqualified” false statements about loan refinancing savings in Internet, television and direct mail ads representing that consumers who obtain a student loan refinance from the lender have saved, on average, specific large amounts of money over the lifetime of their loans or each month, the FTC alleged.

For example, one online ad stated, “Refinancing student loans saves $22,359 on average,” while another claimed, “Start saving on your student loans. Average monthly savings $292.”

But “in numerous instances,” the online lender inflated the average savings consumers actually achieved—sometimes even doubling the actual savings—by selectively excluding large categories of consumers, according to the complaint. When the lender made lifetime savings claims, it excluded borrowers whose loans have a longer term than the previous student loans those consumers refinanced, the agency said, with borrowers typically ending up paying more money (on average, thousands of dollars).

To the extent that SoFi revealed that categories of borrowers were excluded from its calculations, the disclosures were “buried” in fine print, the FTC alleged.

Following a public comment period, the FTC approved a final consent order with the online lender. Pursuant to the deal, SoFi agreed to stop making deceptive claims about how much money student loan borrowers have saved or will save from refinancing their loans, absent reliable evidence to back up the claims.

To read the FTC complaint, click here.

To read the FTC decision and order, click here.

Why it matters

Fintech companies should be careful with regard to their advertising claims or should expect to face similar regulatory action, as the FTC cautioned other lenders to review their ads to avoid making false or unsubstantiated claims. The action also serves as a reminder that the FTC has in many ways stepped in to fill the gap in regulatory oversight of such issues in the absence of activism by the Consumer Financial Protection Bureau. While looking to “stay in its lane,” the FTC has demonstrated that it will bring actions and fines against false and misleading claims to induce borrowers.