NY Attorney General To Sue Student Loan Lender For Deceptive Marketing

Published 08 September 08 02:18 PM | Student Loan Girl

New York Attorney General Andrew Cuomo plans to sue student loan provider Goal Financial, LLC for using deceptive marketing practices to attract new business, according to a CNNMoney.com article (“Student Lenders Under Scrutiny,” Sept. 5, 2008).

Eight other lenders being investigated for misleading borrowers are currently negotiating settlements with the New York Attorney General’s office. Unlike these lenders, Goal Financial did not indicate a willingness to make needed reforms to its marketing practices after Cuomo’s office sent a letter in July informing the lender of the attorney general’s intent to sue.

In the letter, Cuomo indicated that, in addition to using deceptive marketing materials, Goal Financial gave borrowers misleading information about what their monthly student loan payments and annual savings could be, and illegally offered incentives, like iPods or gift cards, to students who convinced other students to apply for Goal Financial’s student loans.

Cuomo’s office also accused the Virginia-based student loan company, which was the sixth-largest lender of consolidated student loans in 2006, of referring borrowers to a student loan comparison Website that Goal Financial owned, without disclosing that the comparison site only listed lenders who paid Goal Financial to include them on the site.

The eight other lenders in Cuomo’s investigation are accused of deceptively marketing private student loans so that they appeared to be federal student loans. The lenders allegedly e-mailed or mailed potential borrowers marketing material about private student loans that closely resembled the government’s marketing material for federal student loans.

“Some of the seals [used by lenders] looked very similar to those of the federal government,” said Alex Detrick, a spokesperson for the attorney general’s office.

These findings come on heels of an investigation conducted last year by the New York Attorney General’s office that found colleges and universities across the country were including certain student loan providers on their “preferred” lender lists in exchange for kickbacks. Schools issue preferred lender lists to their students to help them find a lender for their federal student loans, a practice that Cuomo argued may have sent a disproportionate amount of student loan borrowers to certain lenders.

Since the investigation, at least 22 schools have adopted new codes of conduct and have agreed to overhaul the way in which they do business with student loan lenders.