Feds sue Delaware-founded LendEDU over rating, endorsement practices


The Federal Trade Commission has filed alawsuit against LendEDU, an online student loan rating service site founded by University of Delaware students, according to published reports.

The FTC claims that lenders paid to get top ratings, with the company fabricating endorsements of its services. It is proposing changes in its practices as well as a $350,000 penalty.

LendEDU lists 14 employees and is based in Hoboken, NJ. The company did not immediately respond to a request for comment.

LendEDU’s student loan refinancing page offered a rate table, rankings, star ratings, and reviews of what it claimed were the best or top companies. LendEDU and its corporate officers claimed that due to their “strict editorial integrity,” those ratings “are completely objective and not influenced by compensation in any way,” the FTC claims.

According to the complaint, LendEDU boosted companies’ numerical ranking and position on rate tables based on payments to LendEDU.

For example, in an email to a student loan refinancing company whose rating had fallen from #1 to #3, LendEDU’s CEO said it could retake the top spot by paying LendEDU $9.50 per click. LendEDU’s Vice President of Product later contacted the same company, suggesting it increase the payment to $16.50 per click: “We want to keep positioned as the #1 lender on our site, but we need to justify the move from a business perspective.” The company ultimately agreed to pay $15 per click, and LendEDU kept the company in the top spot, the FTC release stated.

The complaint alleges that LendEDU offered another student loan refinancing company the #3 position for a payment of $16 per click. The contract expressly provided for a ranking “o lower than position 3.”

No disclosure was made until 2016. LendEDU added a fine-print sentence at the bottom of its website that the “site may be compensated through third party advertisers.”

Around March 2019 – after LendEDU learned of the FTC’s investigation – it listed elsewhere on its site the companies that “may provide compensation to LendEDU.” The FTC says the disclosures were placed where consumers were unlikely to see them.

It is also alleged that the company on its own site and on third-party review platforms, the company manufactured endorsements.

Here is one example:

One consumer who offered a glowing recommendation was identified as “Sophia Loren.”

The complaint charges that LendEDU and three corporate officers falsely represented that ratings and rankings weren’t influenced by compensation, failed to disclose adequately that they were paid for ratings and rankings, and falsely claimed that fake testimonials were the opinions of impartial consumers.

The proposed settlement puts court-enforceable provisions in place to address LendEDU’s deceptive practices, requires clear disclosures in the future, and includes a financial remedy of $350,000.

The company was the topic of an article in the UDaily website regarding its success. It was also honored by the Lerner College of Business and the Horn Entrepreneurship program.

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