Beware Those Official-Looking Student Loan Offers
Sallie Mae, the nation's largest student loan company, sends letters marked "final notice" to potential customers, but the company says it does so only when there is an offer with a pending deadline inside, such as an expiration date for pre-approved status. Tom Joyce, a Sallie Mae vice president, says, "It is, at best, misleading to use the term 'final notice' on those marketing solicitations that either have no deadline or contain no time-sensitive information. Eligible student loan customers can consolidate at any time, so anything that implies a final notice should be reserved for a pending deadline, such as an upcoming interest-rate change, or for an expiring offer, such as a special borrower benefit rebate or discount."
Joyce criticizes what he sees as increasingly aggressive and misleading materials distributed by other lenders. "I look at some of that stuff, and I'm fooled by itand I'm in this business," he says.
Deanne Loonin, a staff attorney at the Boston-based nonprofit National Consumer Law Center, says, "If people think they're getting [letters] from the government, then it could be an unfair business practice." To build a case against a company, a consumer who was confused by the mailings would probably have to show that emotional distress or harm was inflicted, such as signing up for loan services under a false pretense, she adds. Consumers can complain to state or federal regulators, who may choose to investigate, and in some cases they may be able to sue the companies themselves.
The Education Department's Federal Student Aid Ombudsman, which resolves disputes between federal loan lenders and borrowers, says it has received some 100 complaints about loan consolidators using marketing materials that suggest they are affiliated with the federal government. The ombudsman generally forwards such complaints to the Federal Trade Commission, the agency responsible for administering consumer protection laws. The FTC reported that in 2006 it received 5,310 complaints about financial aid assistance services, which include student loan processors. The agency would not say whether it was investigating student loan marketing practices.
The U.S. Postal Inspection Service, which investigates complaints about misleading documents sent through the mail, warns consumers on its website about messages such as "open immediately" or "important notice." Rich Sheehan, national public information officer, says the service tries to educate consumers to prevent confusion in the first place. "Students especially have a lot of stuff coming at them, and it's newer to them. We need to make sure they know what's going on," he says.
So far, Loonin says, there have been no cases of student loan borrowers taking companies to court for allegedly deceptive marketing practices. But that could soon change. Coulter, the law student, says, only half-jokingly, "I'll sue them in 2 1/2 years."