Be Wary of Loan Letters
Official-looking mailings can bamboozle students
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 it-and I'm in this business," he says.
Making a case. 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.
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 reports that it has received 583 complaints about deceptive marketing practices by student loan lenders and consolidators since 2000. One consumer filed a complaint in February after her daughter was misled into believing that a consolidator was a government agency and as a result shared her Social Security number with the company. The FTC would not say whether it was investigating student loan marketing practices.
So far, Loonin says, she knows of 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