The Federal Trade Commission (FTC) announced that online student loan refinancer Social Finance (SoFi) has agreed to stop misrepresenting how much money it can save student loan borrowers.
The agreement settles charges that the company deceptively engaged in false advertising for more than two years, beginning in April 2016.
In a complaint against Social Finance and its subsidiary SoFi Lending, the FTC alleged that they made false statements about loan refinancing savings in television, print, and internet advertisements.
“Student loan debt is a huge problem facing students and graduates across the country,” FTC Chairman Joe Simons said in a press release. “Lenders who offer refinancing options must be upfront with students about savings. They cannot make deceptive claims and bury the truth in fine print.”
For example, one online SoFi ad claimed, “Refinancing student loans saves $22,359 on average,” while another ad told readers to “Start saving on your student loans. Average monthly savings $292.” However, the FTC alleges that the numbers SoFi boasted about in its ads inflated the actual average savings — sometimes doubling it — by excluding large categories of consumers.
The FTC also charged that SoFi misrepresented when consumers would pay more under certain refinancing plans, which violates the FTC Act.
As part of the proposed settlement, SoFi is banned from misrepresenting how much money consumers will save or have saved using its products without reliable evidence. If the company violates the order, it could face civil penalties.
“Our proposed resolution does not require SoFi to pay any money whatsoever for this misconduct,” said Commissioner Rohit Chopra in a separate statement. “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.”
In the meantime, the FTC is also recommending that lenders making similar claims as SoFi review their advertising to ensure that they are not making false or unsubstantiated representations.