The student loan refinance company that said it promoted the “best student loan refinance companies” ran into trouble with the FTC.
This case has implications for lead generators in the debt relief space that advertise the best debt relief solutions. This is especially true for sites that rank companies favorably that pay a fee for the ranking.
This is a situation that also increases the costs to debt relief companies who elect this type of marketing.
Public documents state, “Contrary to their claims, Respondents have provided financial services companies with higher numerical rankings or star ratings and higher positions on rate tables based on compensation. Respondents also have added or removed companies from their content based on compensation.
In numerous instances, Respondents have required financial services companies to increase their payments to LendEDU to maintain or improve upon their current rate table positions and rankings. Respondents Matherson, Lenhard, and Coleman either directly requested additional compensation from financial services companies in exchange for better placements on Respondents’ website, or had knowledge of such requests. For example, in an email, Respondent Matherson asked one student loan refinance company to pay $9.50 per click to retake the number one ranking after falling to number three. Respondent Matherson copied Coleman on the email chain requesting more compensation and forwarded it to Respondent Lenhard. The company ultimately agreed to pay $8.50 per click for the number one ranking and rate table placement.
Respondents later asked the same student loan refinance company to increase its payments to $16 per click “to maintain the #1 position on our site.” In an email to the company, Respondent Coleman wrote: “We want to keep [your company] positioned as the #1 lender on our site, but we need to justify the move from a business perspective.” The company agreed to pay $15 per click, and Respondent kept the company ranked number one and positioned first on the rate table.
Respondents offered another student loan refinance company the number three position for payment of $16 per click. The company agreed to the paid placement, and Respondents moved the company from the number four ranking to the number three ranking and from the number four position on the rate table to the number three position.
The contract between the company and LendEDU expressly provided that LendEDU would rank the company “[n]o lower than position 3” on LendEDU’s refinance student loans webpage.
Another student loan refinance company paid Respondents for the number three ranking and rate table position prior to the company above and, later, increased the amount of payment per click for the number two ranking and position.
Respondents’ paid placement policies and practices have resulted in some previously highly ranked companies dropping spots for refusing to pay for their position. For example, Respondents ranked one student loan refinance company number two in the rankings and listed it second in the rate table for several months. When the company refused to pay more to be placed in the second spot, Respondents dropped the company’s ranking to number five or lower and listed it fifth or lower in the rate table.
Respondents have repeatedly acknowledged to financial services companies doing business—or seeking to do business—with them that they can pay for placements, even though Respondents have publicly represented to consumers that their website content is not based on compensation.”
Fake Reviews Are a Problem as Well
Fake reviews are a problem I’ve run into before and in fact, wrote about just recently. One of those sites that had suspicious reviews on it was this one I wrote about that was bragging about Trustpilot reviews.
In the LendEDU case, Trustpilot reviews also raised some concerns.
“Reviews about LendEDU’s website and customer service appear on third-party review platforms, including trustpilot.com (“Trustpilot”). Trustpilot allows users to select a star rating when reviewing a company. The ratings range from five stars (“Excellent”) to one star (“Bad”). LendEDU currently has 126 reviews on Trustpilot, consisting of 123 five-star reviews, one four-star review, one two-star review, and one one-star review.
Of those 126 reviews, 111, or 90%, were written or made up by LendEDU employees or their family, friends, or other associates. All of those reviews provided five-star ratings for the Company.”
“The review written by “Kenny” actually comes from a LendEDU employee using a fake name. Similarly, “Scott,” the purported high school student researching personal finance, is actually the administrator of LendEDU’s 401(k) plan. “Trace” is actually a friend of a LendEDU employee.
In addition, the vast majority of the reviewers do not appear to have used LendEDU. LendEDU offers a loan comparison tool, which requires consumers to enter an email address before they can see a list of potential lenders. Only eleven of the email addresses provided by LendEDU’s 126 reviewers on Trustpilot (9 percent) match email addresses that consumers provided to LendEDU.”
“In numerous instances, the reviews were fabricated and did not represent actual consumer experiences with LendEDU.”
“In other instances, the LendEDU homepage has included “testimonials” from consumers claiming they saved money by using LendEDU’s services. These testimonials have included consumer names, colleges, and years of graduation:
None of these consumers exists. Respondents fabricated these “testimonials.” – Source
The FTC Announcement
Following a public comment period, the Federal Trade Commission has finalized a settlement with Delaware comparison shopping website LendEDU over allegations that it promoted deceptive rankings of financial products for a fee and posted fake positive reviews of its website.
According to the agency’s administrative complaint, LendEDU misled consumers to believe its website provided objective product information, when in fact it offered higher rankings and ratings to companies that paid for placement. Specifically, the FTC alleged that LendEDU falsely claimed that the information on its website was not affected by compensation from advertisers. The FTC also alleged the company touted fake positive reviews of its website.
The final order settling the FTC’s charges prohibits LendEDU and its operators from misrepresenting: the objectivity of the rankings of any entity offering products; the influence of compensation on any content, including any rate tables; and any material connections or endorsements with companies. LendEDU is also required to pay $350,000.
After receiving two comments on the settlement, the Commission voted 4-0-1 to approve the settlement order with LendEDU as well as responses to the commenters, with Commissioner Slaughter not participating.