Student loan debt and COVID-19: FTC issues warning letter to FRANK financial aid institutions

For those dealing with student loan debt (your employees, family members, or maybe you), the CARES Act provides emergency grants to eligible borrowers. But as with other financial aid programs, consumers need to know key details upfront. Federal Trade Commission (FTC) staff just sent a warning letter to New York-based Frank Financial Aid, raising concerns about statements about CARES Act grants and cash advances, as part of its ongoing efforts to monitor The company is advertising the products as part of an effort to market questionable claims stemming from the coronavirus pandemic.

What do FTC staff care about? Some potentially misleading statements on Frank’s website. A basic fact to remember is that for aid provided through the Department of Education’s Higher Education Emergency Relief Fund established by the CARES Act, the Department of Education has made clear that each school has its own unique application process and “determines eligibility. standards for students.” Access to financial aid, financial aid amounts, and how and when financial aid is disbursed (disbursed) to students” – which raises the questions that Frank alleges.

• Frank said consumers can apply for the Student Emergency Grant “in 2 minutes” through the company’s website and “Frank will email you all the information you need to send to your school.” But according to the FTC, The letters Frank created do not fit every school’s application process and documentation requirements.
• Frank said that to qualify for emergency relief, students and/or their parents must have experienced one or more of four determination criteria (e.g., layoff or furlough) since March 1, 2020. But again, each school determines its own funding eligibility criteria.
• Additionally, Frank said consumers who received cash advances through the company (which are not tied to any CARES Act relief) can “[p]When your financial aid comes, give it back to me. ” However, the fine print states that consumers must repay Frank’s cash advance “61 days after the date of payment.” Additionally, despite claims on its website that consumers can get a cash advance of up to $5,000 on student loans with “no interest and no fees forever,” the company actually charges $19.90 per month.

The warning letter recommended that Frank review its advertising and marketing activities, including its website, social media, emails, telemarketing calls and text messages, to ensure the company complies with the Federal Trade Commission Act’s prohibitions on unfair or deceptive acts or practices. The letter also recommends a closer look at the disclosures required by the Truth in Lending Act. FTC staff have directed the company to respond immediately to us with specific actions it is taking to address these issues.

The message to other marketers is that the pandemic will in no way change established consumer protection principles. That’s why FTC staff pay close attention to company statements.

Looking for information about dealing with student debt during the pandemic? The Department of Education provides information to borrowers. Additionally, please review the FTC’s consumer resources to address the financial impacts of the coronavirus.