A Florida firm student loan “direct marketer” has settled charges with the New York State Attorney General over an alleged deceptive marketing scheme involving several universities and school athletic departments.
According to Attorney General Andrew Cuomo, a four-month investigation found that Clearwater, Florida-based Student Financial Services Inc. (SFS), which also operates under the banner of University Financial Services (UFS), had agreed to pay some of the nation’s top universities, school athletic departments, and sports marketing firms for generating loan applications, in a kickback scheme euphemistically known as revenue sharing. The company had contracts at 63 colleges nationwide, 57 of which are National Collegiate Athletic Association (NCAA) Division I schools.
Under these agreements, the company also paid for the rights to use school names, team names, colors, mascots, and logos to advertise their loans directly to students through Web sites, mailings and toll free telephone numbers. This practice, known as “co-branding,” was intended to imply that the company was the official lender of the school, or that it was actually a part of the school. Schools, athletic departments, and sports marketing firms made these agreements without evaluating the quality of the loans, according to Cuomo.
Under the settlement, which was joined by Florida Attorney General Bill McCollum, SFS has agreed to:
* End all lending-related agreements 63 schools including Georgetown University, Wake Forest University, University of Kansas, Central Michigan University, St. John’s University, University of Washington, University of Oregon, University of Texas El Paso, Rutgers University, Georgia Tech, Florida State University, Florida Atlantic University, the University of Central Florida and the University of Pittsburgh.
* End all lending-related agreements with five sports marketing companies that, in some instances, were sold the right to market the school’s insignia, colors, and mascot, and in turn signed an agreement with SFS. These companies are ESPN Regional Television Inc., International Sports Properties Inc., Host Communications, Nelligan Sports Marketing Inc. and Learfield Communications Inc.
* Launch a print advertising campaign at 63 schools alerting students through their top-circulating newspapers that they must protect themselves when shopping for a loan.
* End the practice of cash-based inducements, including paying students up to $50 to refer their peers to the company and encouraging students to apply for SFS loans by creating contests where they could win up to $1,000.
SFS has until Dec. 31 to comply.
Also under the settlement, SFS has agreed to adopt a new Code of Conduct developed by Cuomo that prevents false and misleading direct loan marketing to students, according to Cuomo.
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